OutOfDebtBlog.com

This is the final step in my series of steps to take in order to get out of debt. It’s also the most important!

There’s a good chance that you didn’t get into debt in one day - and it’s very unlikely that you’ll get out of debt in a day. You could of cause win the lottery - but then - if you can afford to play the lottery, you’re not really serious about getting out of debt.

Quick fixes doesn’t work! They never have - and they never will! Although you never hear about it, countless numbers of “winners” in lotteries all over the world end up pennyless after a few years. Easy come - easy go!

The point is - no one ever taught them how to manage their money - so they end up spending them on luxury items and “friendships” that won’t last, rather than making sure that they’re finacially safe in the long term.

The lessons you will learn about controlling your finances, while working your way out of debts, is going to be a lifelong asset for you. In the long term you will be able to enjoy life - without the hassle of owing money to anyone - bringing great peace into your life, and enabling you to focus your mental energy into more productive things than worrying over your finances.

An important thing to remember, though, while working your way out of debts - is to make sure you don’t fall for the temptation to deny yourself everything. Part of the excersise is to learn how to live a life in balance, and while it is important to get all your debts paid off, you must reward yourself from time to time.

You deserve it!

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It is time to start looking at the way you think about money - your financial attitude.

Since you’re in debt (well - reading a 7-step plan for getting out of debt anyway), there’s a good chance that you may have to look at money a bit different than what you used to.

Your attitude to anything in life - including your finances - determines where you’re going to end up. Over the last few years I have had my views on money challenged and changed several times - and I’m sure they will be in future as well.

Open your mind to new ways of thinking about your finances, and try out some ideas, to see if they work for you. Chances are that you will discover things that you wouldn’t have if you didn’t try to educate yourself.

Increasing your financial intelligence is probably one of the biggest favours you can do yourself. Don’t think that because your bank advisor says “it is so!” - that is the truth. He has got his own reasons for saying what he does. Make your own enquiries and draw your own conclusions, based on what you know. If you feel you need to know more - you have got the worlds greatest source of information right in front of you.

Your mind is your number one asset! Make sure you look after it - exercise it - and use it to its full potential.

You’ll be amazed what will happen!

Technorati Tags: Financial intelligence, Mind, Debts

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This suggestion probably comes as no surprise to anyone. The surprising thing may be how low down the list it is!

A lot of people struggling with debt will try to increase their income to get on top of their debts - yet at the end of the month - they end up asking “where’s the money?”

This is mainly due to them skipping the previous exercises - and lacking the financial control they provide. They end up spending the extra money made - rather than sticking to their plan of getting out of debt.

When making extra money - such as working overtime, taking on extra work, selling off stuff that you don’t need or want - it is vital that you discipline yourself to spend the money right. This means - using the majority of them to pay off your debts.

I’m not saying that you shouldn’t treat yourself when you can afford it, because sometimes you simply need to do that to keep your motivation up, but on the other hand there’s not much point in treating yourself to something you can not enjoy, because the weight of your debts are keeping you down.

Try to look for ways to increase your income - and keep spending the extra money right. When you need “a lift” to stay motivated, try to think of the amount of extra money you will have to yourself one day - when all your debts are paid off.

Again - this is a subject I’m going to look at in greater detail later on - so I’m not going dwell on it here. Just giving you a taster of what is to come!

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Remember setting up a budget in Step 1? Did you take time to look out for expences where you could save money - in order to have more money to pay back your debts?

If not - now would be a good time to start! Why? Because if you are serious about getting out of debt - you need to find at least £75 (or equivalent in your currency) - to pay off over and above your minimum payments.

It may sound like a tall order, but never the less it’s achievable! I’m not only suggesting that you try to cut back on spending money - which is the obvious thing to do - but also, I want to encourage you to make sure you are getting the best deal on what you buy.

Here in the UK - some people can save up to £10 a month just for switching to another energy supplier. This can be done in half an hour. Other areas could be:

• Your phone (line rental and use)
• Insurance (home, car)
• Utilities
• YOUR DEBTS!

The last one is a surprise for some people - but think about it! If you have a storecard with a balance on it charging a typical 25%+ APR, how much would you save transferring it to a loan at 7,9% APR? Or maybe you could even make a balance transfer to a credit card with a promotion of 0% - and try to pay the amount off before the end of the promotional period.

I am going to discuss this in greater detail later on, and will not dwell on it too much now. My aim for the time being is to give you ideas that may save you money here and now.

Try to find ways to pay your debts off faster. Remember - every little helps!

Technorati Tags: Save money, Pay off debts, Debts

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After setting up a budget, and using this to start controlling your spending, it’s time to find out exactly how much you owe and where.

Make a list of all your credit cards, loans and your mortgage. Then you will need to gather the following information for each of your debts:

• The outstanding balance
• The interest rate (APR)
• The minimum monthly payment
• The time needed to pay off the debt (aproximately)

Now - you need to place your debts in order of priority. You can do this in two ways:

1. Start with the debt that you can pay off in the shortest amount of time, and finish with the one that will take you the longest to pay off.
2. Start with the most expensive debt you have (highest APR), and finish with the cheapest.

The first method may take you a bit longer, since there’s a chance that you will be paying more in interest over the period of time it will take you to pay off your debts - but it’s a great method if you’re personally driven by accomplishment.

The second method is good for you if you can “see the bigger picture”, and in turn you will be able to pay off your debts faster this way, because your interest payments will be less than by using the first method.

Both methods are great for - and should be used by - individuals with the personality for which they are best suitable. If you’re unsure which category you fit in to - go with method 1.

While setting up your budget in step 1, you should know how much you can pay back on your debts each month. Keep paying this amount off on your debts all the way through, and increase the amount if you have any funds spare.

Now - focus your attention on the first debt on top of your list. While continuing to make minimum payments on all the other debts you have, pay off all you can on this particular debt. If this is not possible (i.e. with a loan that will not allow extra payments) - put the money aside in a savings account until you can settle the debt in full.

Using this way of repaying your debts - most people will find themselves out of debts in 5-7 years. Even those with a mortgage on their house.

Technorati Tags: Pay off debts, Interest rate, Debts

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When fighting your way out of debt - obviously controlling your spending is key - yet it’s less important than having a budget. This is, however, where most people start out.

The problem with doing so, is that not having a budget to stick to, means that most people tend to go back to their old spending habits (little by little). Those spending habits were the exact thing that got them into debt in the first place.

I’m not trying to advocate a frugal lifestyle here, although in some cases that wouldn’t hurt, but I would encourage you to use “common sense”, and question every purchase you make.

Ask yourself - what would happen if I didn’t buy this item? Do I really need it? Is there a chance that I could buy this item for less by doing a bit of shopping around?

You may be surprised how little real value some of the things you used to buy have. You may also be surprised how easily you can do without them.

When trying to eliminate debts - every penny counts - and saving 2 pence is as good as earning 3!

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The first thing you must do in order to take control of your finances, and eventually get out of debt, is to set up a budget. Ironically this is where a lot of people stop because they find that it’s too difficult, too much hard work, or they think they can “work out their income and outgoings in their head”.

I admit that setting up a budget (which I’m going to do myself shortly) is a tedious task. No - it’s not very interesting. No - it’s not very entertaining. For some of us it can even be a bit of a “slap in the face”. But long term it’s well worth the time and effort.

Try not to think of a budget as a pair of restraining handcuffs. Think of it as a means to take control of your finances and achieve financial freedom. A budget lets you control your money - instead of your money controlling you!

A good buget will help you get out of debt faster, because it helps you to identify areas where you spend too much money. By using those spare funds to pay down your debts instead - not only will you get out of debt faster - but you will also save lots of money in interest payments.

There are several tools that you can use to make it easier setting up a budget. You could buy a piece of software to do the job for you - but more often than not these packages tend to have more features than what you really need. You could download a spreadsheet template to get you going - which is both cheap and easy - though you will need an office suite to run it. Finally you could find a template to create your own spreadsheet. This is more time consuming - but free.

Personally I will try out the first two options - and let you know of my findings when I have had a go at it. Don’t let this hold you back though! Start your own budget today - even if it’s a basic one - and take control of your money

Technorati Tags: Budget, Pay off debts, Control your finances

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