Many Americans are in debt. Car loans, credit cards and student loans are the three most common types of criminals among many family borrowers. If you find yourself in this situation, you are not alone. Many American families are currently paying wages and do not see any purpose. This debt is unacceptable in the richest country in the world. As people continue to decline in debt and their children observe and learn these bad behaviors, certain things must change.
Good spending habits are easy to explain. Don't spend more than you make. This allows you to keep your debts unaffected. If there is no such process as a car loan, many people may not own a car. We learned that borrowing money is the only way to survive. When we talked about loans, many people said that they could not accept multiple loans to finance their lifestyle. This contradicts the idea of spending less than your income. Just because you can pay for items and interest on a step-by-step basis doesn't mean you can afford it. You are actually renting these items from the lender and you pay the risk of the loan. This makes them rich, and you continue to leave debt.
People with good spending habits don't borrow money, they can save their income, and then decide to write a check for things that match the budget. This philosophy allows even the most appropriate income earners to retire for a long time. If you don't have a loan to repay the lender, even your mortgage, then you can consider how much you can save. Once you get financial freedom, you can start saving for retirement soon, because some of the budget you have previously reserved for repayment of loans is now available for investment accounts, which can help you succeed.
In the past 20 years, I have developed a simple but effective plan to eliminate debt through a six-step process, allowing you to take over consumption habits and focus on eliminating debt. If you follow the correct, you should be able to eliminate most of your mortgage's debt within 30 months. Considering that the average car loan is more than 48 months, this is not a long time.
The first step is to establish a budget. It sounds easy, but many people don't sit down and budget to explain every dollar they spend. In fact, if you ask a few people what their total monthly cost is, they may have to start writing on paper. Every family needs to follow a strict budget that is transparent and enforceable. I bet the company you work for has a budget. I also bet your employer knows what their monthly expenses are. This is because they don't want any payment defaults and your family should behave the same way. Spend 30 minutes to write an itemized budget.
Establishing a budget can achieve three main goals. First, it allows you to see where you spend money, which makes it easy to make some sound financial decisions. Next, it allows you and your spouse [if any] to be on the same page, so you can understand each other's spending habits. This is important, you and your partners must be economically united, otherwise any other steps will be ineffective. Finally, it will tell you the exact amount of the family you left. This information is very important and you can proceed to step 2.
Part of the budgeting process also includes eliminating additional costs or at least shelving some of the costs. Many people may find that the problem that is difficult to solve is the refund of the retirement account. Don't worry; this is only a temporary situation. In addition to your home loan, you can continue to pay for your retirement account. This may seem dangerous, especially if you only have a small nest of eggs, but stopping these donations in general will allow you to put more money into your debt, so you can end your debt faster, so you can More contributions will be made in future retirements. If you previously paid $300 to the IRA and your debt was $30,000, you can increase the IRA's contribution and maximize it after you pay off the debt.
There are many ways to allocate funds in the monthly budget, which I will discuss later, but here are a few quick notes. Some people rarely participate in the 50, 30, 20 rules. This means that 50% of the budget is allocated to fixed payments, such as cars and home loans. 30% is used for variable payments such as electricity and groceries, and the last 20% is used for savings and investment. This strategy does not meet the goals of each family, especially when trying to repay debt, so I recommend that you resolve these numbers before you have debt, not including mortgages. This allows you to set realistic expectations for the debt reduction schedule. You should use any percentage rule only after you have paid all the debts other than the mortgage.
Step 2a is to create a small starter savings fund that is only used in emergencies, such as a car failure or missed a day's work because you are sick. Different financial advisers recommend different standard amounts, but I think a set of amounts is not safe for every situation, because some people have more people in the family, which is equivalent to more responsibility. The number I recommend is $1,000 for singles, $1,500 for married and no children, and then $2,000 for married children. Similarly, the fund is only used for unplanned activities, and anything other than this microfinance must come from a monthly budget. For many families, this alone may take several months to build, but stick to it because it is important to establish a financial buffer before step 3.
If possible, step 2b is to increase and expand your income. Services like Uber and Lyft allow people to make extra money with little extra effort. You can also provide pizza, walking dogs, mowing lawns or babysitters in your spare time. No matter what you decide to do, math tells us that the more income you create, the more debt you have. Filling your spare time with extra work makes it easier to disconnect cable TV and lose $150 in bills per month.
Step 2c tells people that if any bills go to the collection agency, you are responsible for repaying the debts and putting them into step 3, otherwise they will continue to bother you and your credit score. When calling these agents, you should know exactly what the debt is before any late payment. This will be your advantage when negotiating payments. After adding extra fees, I saw that the original bill of $400 exceeded $900. The paying agency buys these default accounts and tries to collect anything they can make a profit. If you give them $900, they will be ecstatic, but you will waste your money. Start the conversation by asking them the best offer to resolve the bill. They may fall to your initial arrears, but this is not their best offer. Please tell them that you are not that much and provide a quarter of what they owe you. They may or may not accept it, but just realize that you can definitely negotiate the proceeds. In addition, please ensure that you request a letter stating that the negotiated amount will be cleared before you send any money. If possible, please send it by bill of exchange so they can't access your bank account.
Step 3 is what many people call debt snowballs or sometimes debt avalanches. You assume all debts, arranged in the total amount from the lowest to the highest, and repay in this way. When you perform this step, you only pay the minimum amount of other higher debts and spend all of your extra funds outside the monthly budget with minimal debt. I recommend this method, but I also want to save as much money as possible, so I have some understanding of this typical strategy. I also recommend mixing the so-called trapezoidal method. For any high-interest loans, such as credit cards, payday loans or any range of more than 10%, I will pay at the highest interest rate first. This saves extra money because you can avoid letting high interest rates linger. If you let them stay only for a minimum, it may cost you hundreds of dollars. For example; you have a $35,000 student loan with 3% interest, a 9% personal loan of $8,000, a 28% $9,300 credit card loan, and a 5% $6,000 car loan. The snowball method tells you to do a car, a personal loan, a credit card, and then a student loan. However, this will work very well; you will continue to pay very high interest credit card payments, which will cost you more because your minimum payment may not include interest on the principal. I would recommend that you attack the highest interest in this situation and then return to the snowball method. Remember; only attack high interest items, usually this way credit card and payday loans, and then continue the method of debt snowball. So this example will let you pay for the credit card first, then the car, the personal loan, and finally the student loan.
Keep in mind that this step only works if you are all-in and fully focused on the output. For some people, it may only be six months, while others need 36 months to eliminate their debt. You can't continue to use your credit card, dine at a restaurant or buy items that are not in your monthly budget. Use your Step 2 to start the savings fund with caution. It only works for real emergencies, and if you know you need money in the future, it should be part of your monthly budget.
The fourth step is to complete the construction of the emergency savings fund. At this point in your journey, you get everything except the house, so you can get more of the available income for the unexpected. Some financial consultants have a certain amount to make customers feel comfortable, but I am really based on your total...
Orignal From: Eliminate debt and plan your future in six steps
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