Getting Out of Debt: Top 5 Easy And Effective Steps To Handle The Debt!!
Yes we can face our debt problems like all other problems. Whatever the situation of your debt, you can change it or at least stop being more badly by knowing your present situation and taking decision according to your present condition.
Maybe people don’t want or not motivated to do anything because they think it is a hopeless situation and getting out of debt is impossible.
Now you may ask what should you do to handle debt or do anything about it.
Step 1: knowing your present situation: it is important and basic for removing debt. This means you should know, your amount of debt and interest you are giving in each month and so on. Say, if your monthly income is 4000 dollar and you are paying 200 dollar interest per month. Than you are paying 5 % (percent) of your income monthly.
Step 2: Evaluation Part: from above example of the situation, you are spending 200 dollar extra for the interest not the principal. And obviously because you like the service you bought. But you should ask yourself, is that worth 5% of your income?
It may be happen all your money is used for paying interest but not for the principal of the debt. Yes it is an extreme case . But you should generally compare interest to principal of any kind of debt for a long period.
You can use calculator from website to know the interest for your debt situation. Say, you owe $10,000 and interest is about 7%. And you can use that calculator to know that. You could pay only $116 per month, but it would take you 10 years to pay it off. The interest would cost you $3,933 – almost 40% of the total amount.
Step 3: develop a realistic budget: When you know your situation you can take farther steps. Like develop a budget that will allow you to make payments as large as you can handle to pay the debt of yours.
Step 4: ‘snowball Method’ this method is the most easiest and popular among lot of us for getting out of debt. according to this method, give the smallest bill first and than take care of the next smallest bill , until you have reached at the point where you have no more debt to think about.
You may also think about reverse of the above method (‘snowball method’). Its also good one to follow as you will need to give less interest charge for your debt. But problem is you may get less motivated as you will less progress in your situation. by the way , in this method you have to start with biggest debt and then with the next biggest debt.
Step 5: Stop borrowing farther. Beside these things, you should stop borrowing. You should not take any farther debt until you paid the first to a reasonable level. That level is zero for credit card junkies and for others it may be in the 5% range. But a person with a good will power may think of 20 percent is the maximum limit.
Beside above steps you can think about debt consolidation if you like.
But two hardest things for many of us are having a good insight and making farm decisions for the long term to change the financial bed situation. These are two basic initial steps for a financial freedom.
B Shahriyar, who has been teaching about handling debt for last ten years, has made a website on get out of debt quickly to educate others about handling debt. for limited period you can read the articles for free by visiting his tips for getting out of debt site.