Monday, June 13, 2011

How to Get Out of Debt

1. Stop buying on credit.
2. Contact your creditors and push to get your interest rates lowered.
3. Balance transfer your high-interest debt to lower-interest accounts.
4. Pay off your highest-interest debt first.

This simple advice presumes you have income. Maybe not enough income, but there's a paycheck coming in steadily, and that gives you some choices.

Another set of tips to try:

1. Change up your eating habits. Do not buy food at the same places, or the same food. Instead, try to work from a budgeted food amount outward. If you have $100 for food this week, what can that buy you, and how long can that last, and how often must you shop, and is food preparation involved?

2. Sell any vehicle on which you are making payments, and buy a used vehicle outright. It has to be in good condition. You have to be reasonably certain it won't beggar you with repair costs. But a paid-for car is usually cheaper to own and run than a new car.

3. Hold a yard sale (or post on Craigslist, which is free) and sell anything you no longer need or want. It may surprise you how little people are willing to pay for your used goods. They may not buy them at all. A good reminder not to spend so much money on buying all that new stuff in the first place.

4. Empty your clothes closets into your suitcases. What you own doesn't fit? Reduce it until it does, and never buy a piece of clothing again without getting rid of a piece. Be mindful of this when you shop for clothing, because it is easy to think you need multiples when the truth is you don't. If your suitcases are full, you have enough clothes.

Add your own tips for getting out of debt if you've got 'em.

4 comments:

Hopeful Lily said...

rtb.ink said...

Though I don't debate what you wrote, I don't think it will be helpful. A better restatement of your premise would be: "To get out of debt you must learn to live on cash", which is a different skill set. One example is that to live on cash you must keep sufficient reserves of cash liquid to be able to handle emergencies, or just larger purchases. You have to plan out your spending. Credit and cash change time.

Hopeful Lily said...

Attempting to live on cash goes against the tide of our increasingly digital society. It is not necessarily sensible to tell people to stop using electricity and go back to trading cows to get cloth, that is, to stop using the current tools of our monetary system. We simply need to learn to use them better, and to our advantage rather than to the advantage of our creditors.

Thus, my suggestions tend to be about how to approach the inevitable need to deal with the way we already spend money. The truth is, using a credit card is perfectly all right if you have the cash to pay your bill in full. Spending that cash twice over is what usually gets people into trouble, so perhaps the real problem is that too few of us mastered the arithmetic we were taught in elementary school.

rtb.ink said...

My point is that people use credit when they shouldn't i.e., you whip out your card to by a latte. You don't need a piece of plastic for most of your life. There are times when it is useful, but only for then.

Your comment on arithmetic percipient, I don't know to many people who understand compounding interest.

Nick Jacobs said...
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