5 Small Changes to Become Debt Free

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Looking up at what seems like an endless amount of credit card debt and feeling overwhelmed? Well, you aren’t alone. In the United States, the average household debt sits at a staggering $15,762. That amount can intimidate anyone, so if you are feeling despair over it then don’t be too hard on yourself. If you realize that this is a problem that you want to fix then there are two very important things you have to do.

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1. Create A Plan

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2. Stick To That Plan

The first step in creating a plan is to figure out exactly what you are dealing with. Start out by compiling information about each credit card company you owe money to. You need to know the amount you owe, the interest rate you are paying on the debt, and what your monthly payment is to each one. It’s also a good idea to know how long it will take to pay off the debt using your current minimum payments. Before we start taking steps toward creating a repayment plan I’d first like to go over some important statistics and other information regarding credit card debt.

Why The Minimum Payment Plan Is So Dangerous

No matter who your credit card company is they are going to have a minimum monthly payment based upon the amount of money you. This small payment can be tempting to make but make no mistakes about it, it is a trap designed to keep you in debt longer and get you to pay them more money. The longer you make payments for, the longer you are paying on interest, it is really that simple.

Because making the minimum payment causes you to pay so much more money over time it is by far the worst way to work on paying off your credit card debt. Making the minimum payment can cause you to take 5 or 10 years to pay off your debt, and on top of that, it can easily double or more the amount of money you have to pay. For example, let’s say that you borrowed $3,000 at an interest rate of 26%. Making the minimum monthly payment of only $75.00 sounds good in the short term, but it will end up taking you close to 8 years to pay off the balance. That means that by the end of the loan you will have paid $4049. This is how credit companies work, and this is the trap they want you to fall into.

Shocked at just how much money the minimum payment trap can cost you? Well, the good news is that by adding just $25.00 a month toward the principal you could cut down nearly 4 years of payments on your loan. That would end up saving you $2,152 in interest over the term of the loan. That’s quite a difference isn’t it? Another great way to pay off debt faster is to get a lower interest rate on what you owe. Lowering your interest rate by only 5% on this loan can save you $959 in interest over the term of the loan.

After learning about minimum payments and interest rates it should be pretty clear that these are set up to work in the favor of creditors. They are using tactics to get you to pay more interest which can over the term of your loan double the amount of money you are paying. For someone who is borrowing money understanding this information should be a real eye-opener that gets them to rethink the way they borrow money and pay it back.

Creating A Budget

Since you now understand that making the minimum monthly payments is a mistake the next step is to figure out how you can free up money so that you can make more than the minimum monthly payments. That means it’s time to make a budget. Just in case you are not keen about living on a budget keep in mind that doing so can save you hundreds or thousands of dollars in interest payments.

So now getting to the budget. The first step is to make a list of all of your expenses. This will let you see where your money is going each month so you can get a better handle on your spending habits. You should make two lists. The first is a list of essentials that you cannot survive without. For example, you would include your rent or mortgage, utility payments, car payment, insurance, food, gas, minimum credit card payments, and anything else that you need to survive on.

The second list should contain expenses that are wants and not needs. Examples here would include going out to eat, going to the movies, buying unnecessary items, and anything else you spend money on that you could survive without. While you may not like doing it cutting back on items on the second list can make a huge impact on your financial health in the long run. It can be tough but remember that you are here because you realize it’s time to make changes and to get your finances in order.

Small Changes Can Add Up To Save You Hundreds Each Month

A lot of people think that getting back in control of their finances is going to take huge sweeping changes to their lifestyle. The truth is that a few small changes here and there can add up to hundreds of dollars in savings each month. That’s hundreds of dollars you can use to avoid making the minimum monthly payments on your credit cards! The following is a list of monthly subscription plans that you may have that you can adjust or eliminate in order to save yourself a considerable amount of money each month.

1. Satellite Or Cable Television

Paying a monthly satellite or cable bill and paying $100 or even $200 a month? Well, you aren’t alone. Many people have satellite or cable television and it’s one of the unnecessary expenses that you should look to cut out first. One easy trick you can use to keep your monthly bill down is to negotiate a lower monthly payment with your television provider. How do you do this? Tell them you are thinking about switching companies, this is an especially useful tactic whenever your agreement is up. Your satellite or cable provider wants to keep you happy, so they will usually offer you some so-called special deal to keep you in the fold. On top of that, they will also often offer several months of a free or reduced cost premium cable channel as well.

If these cost-cutting measures aren’t enough there are other options you can pursue. You can contact your television provider and ask if they have any lower cost plans that they may not publicly advertise. One option you may have is to contact your provider and ask if they can temporarily stop service, and payments, for a period of time. As long as you agree to keep the service and renew it making your payments for the same number of installments they will usually be willing to do this for you. While this is a temporary measure it can be useful for allowing you to put the money you would normally pay on your bill toward your credit card balances.

2. Cell Phones

Step one in trying to get a lower monthly bill with your cell phone provider is to take the same approach you did with your television provider. Ask for a manager since it’s ultimately going to take management to get anything done anyway, so this will save you time. Then when speaking with the manager explain that you are having some financial issues, that you like having them as your cell phone provider, and then ask what they can do to help you so that you can remain a customer with them. In many cases, you can save anywhere from $10 to $50 a month by simply adjusting your data package.

3. Roku and Apple TV

Heard of Roku or Apple TV? If not then it’s time to start learning about it. If you are tired of paying a lot of money to a satellite or cable company then looking at alternatives is in your best interest. Could you get by using only Netflix or Hulu for a year or more? If so you could pay substantially less for you television needs. You can then use the money you are saving to pay down your credit card balances.

4. Other Types Of Monthly Subscription Plans

No matter what type of monthly subscription plan you have you can easily find out if you can save money by just contacting the company and seeing what you can do to get them to work on lowering your payment. Remember that every single dollar counts, and every dollar you save you can use to work on paying down your credit card debt. While it may not seem like it small amounts of additional money sent to the credit card companies every month can save you a lot of money in the long run.

5. Trying To Lower Your Interest Rates

Many people don’t realize that in order to get the process started on getting a lower interest rate all you have to do is pick up the phone and ask about it. Before picking up the phone though do your homework and see what you can offer to the company in question that will get them to want to work with you. Getting different companies to compete and bid against each other is a great tactic that can really help you to get the best interest rate possible. Once you get an offer from one bank then approach the next and explain what their competitor offered and ask if they can beat it. In many cases, you can keep this process up for quite a while and end up with a much better deal.

Before Getting Started

Remember that these tips that have been provided here are only going to help you if you quit using your credit cards. You can’t keep adding to the problem if you want to have a chance to get rid of the problem. Now that doesn’t mean you should get rid of your cards or cut them up, you need to keep the accounts open while you are paying on them. But just don’t use them. If you have to them put them someplace safe and keep them out of your wallet if that’s what it takes to force yourself to get away from using them. You can succeed in getting out of credit card debt if you make a solid plan and you stick to that plan!

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