How to Create a Debt Elimination Plan

Getting out of debt is the quickest way to becoming financially secure. It is important to note that not all debt is bad. There is such a thing as good debt. Good debt is debt that makes you money. For example, a real estate development loan from which you can collect rents as a result of a commercial development is good debt. Therefore, your debt elimination plan should focus on your bad debt. Bad debt is debt that costs you money. An example of bad debt is credit card debt. Another common bad debt is a car loan. Cars depreciate in value and thus, taking out a loan to buy a car will cost you money.

Eliminating your bad debt is important should you want to achieve financial security. The most important thing that you have to realize is that, absent you winning the lottery or inheriting a large sum of money, your bad debt is not going to disappear overnight. Therefore, getting out of debt is a process. The point is, however, should you stick to an economically feasible plan, you will start to notice a drastic decrease in your overall debt. Therefore, you will pay less in interest payments and thus, will save money on your debt.

A very common mistake that people make when enacting a debt elimination plan is that they continue to accumulate debt while trying to pay off the same. The debt payments that you make and the debt reduction techniques that you enact will be for not if you continue to offset these advances by accumulating more debt. You cannot reduce your debt and create more at the same time. Therefore, if your debt elimination plan does not include a plan to prevent the accumulation of debt, your debt elimination plan will be useless.

In order to have an effective debt elimination plan, you have to pay off the highest interest debt first. Your highest interest debt will most likely be your credit cards. Therefore, you need to pay off your credit cards first in order to get out of debt more quickly and to decrease the amount of money that you waste on interest payments. This is not to say that you should refrain from paying your other debts during this time. Put simply, you have to contribute more of your payment dollars to the higher interest items. Therefore, for example, should you have $100 per month to pay of your debts and one debt has a 22% interest rate and another debt has a 7% interest rate, you should pay a certain percent to each debt, the higher one to the 22% interest rate (for example, you might want to pay 80% to the 22% interest rate (which would be $80) and 20% to the 7% interest rate (which would be $20) so that you can pay off the higher interest debt sooner).

Focus on your bad debt, be patient, refrain from accumulating debt while paying off your existing debt, and pay the higher interest rate debt first. Doing this will insure that your debt elimination plan is a success.

Financial Planning in Your Twenties

If you are in your twenties, the good news is that you have a lot of time before retirement and thus, you can build a very large retirement account and/or savings "nest egg." The bad news about being in your twenties is that you may not have yet reached an extremely high paying position in your career and thus, you may not have a lot of capital with which to invest. Therefore, your financial plan may have to be progressive to compensate for your current financial condition. When I say "progressive," I mean that as you get older or as you earn more money, you should invest more dollars because more may become available.

Being in your twenties also creates the dilemma of split priorities. Basically, you have to strike the delicate balance of saving enough money for the future but not saving too much such that it interferes with your ability to address present financial concerns. If you are in your twenties, chances are that you have just graduated from college (if you went to college), may be thinking of graduate school, may be in the market to buy a home, may be in the market to buy a car, may be getting married, or may be starting a family, to name a few. As such, all of these things require a lot of money. Therefore, you should be concerned about these expenses.

As stated above, because you are in your twenties, you have a long time before you retire (under the traditional model) and thus, because you have a lot of time to profit from investments, your investment strategy for retirement should be pretty aggressive. The theory behind such a strategy is that being aggressive now will give you the opportunity to make a large profit. However, should you lose money, because you are so young, you will have more than enough time to recover any losses. Additionally, as you age, you should move your investments into less aggressive stocks because as you age, your focus should be to maintain you current profit levels and to receive consistent returns.

If you are not sure how to start or what to do, talk to a professional. There are many competent financial planners out there that can help you obtain and maintain a winning strategy for short and long term growth based upon your goals. Therefore, find one today to help you take the steps toward financial security.

The Effects of Debt on Your Emotional Well Being

I have seen debt cause more stress than most things or problems that people encounter throughout their lives. Debt is an interesting beast. People become so consumed by debt that it is all they think about. Like being told you have a terminal disease and are about to die, people lose sleep, lose their appetite, and let their personal life (including a marriage, children, significant other, and/or friends) suffer because of the constant worry of making next months payments. People actually risk their health with this amount of built up stress.

The good news is, there are ways out of debt. The better news is, once you are out of debt, there are ways to control your debt so that you never have to experience those feelings of worry again (at least not because of debt).

Depending on your situation, cutting costs and balance transfers, consolidation, and bankruptcy all are options to consider. Obviously, some of these options will negatively affect your credit score, but that can be rebuilt. Choosing between your health and your credit score should not be a difficult decision. The point is, you have to take action to change your situation. Stressing out every month at the expense of your health and your personal life is the worst thing you can do. Change this circumstance by doing what is necessary to get out of debt.

Getting out of debt is the primary concern. When you start to notice the decrease in you debt, you will start to feel better. You will notice a relaxing feeling like everything is going to be okay. It is a great feeling, therefore, to maintain this feeling (as far as debt is concerned), you need to manage your debt.

The bottom line is, like always, use credit responsibly. All of these problems could have been avoided had you stepped back and assessed your situation during the debt accumulation process. Control your debt and you will be able to take your life back.

Saving Money While Paying Off Your Credit Card Debt

Credit card debt can be a real financial drain. You have all heard the statistics and seen the commercials. If you made only minimum payments, it could take you over 7 years to pay off a debt of only $2,000! This is insane! Why pay off the interest when you could be paying off the principal? There are some simple steps you could follow in order to save money on your credit card debt.

First, you must make more than the minimum payment. If you broke down the minimum payment, you would discover that almost half of it goes to paying interest. This is money that you are paying that is not reducing your outstanding balance. If you pay more than the monthly payment, more money goes to the pay off the principal and thus, it takes less time to pay off the debt.

Second, you can utilize a balance transfer. This option is only good if your interest rate is high. Sometimes, credit card companies will offer to give you a card with a 3, 6, 9, or even 12 month interest free or very low interest rate (usually around 2%) introductory period. After the introductory period, the interest rate resets to the default rate. If this default rate is lower than you current interest rate, you should transfer your balance to this new credit card. It is a very simple procedure, you will save tons of money because you will significantly pay down your debt during the introductory period, and your default interest rate on the new card will be better than the interest rate on the current card thus, saving you more money. Everybody wins!

Last, you can call your credit card company and ask for a lower interest rate. You have to have good credit to do this and usually have to have had an account with the credit card company for over six months. However, if you can take advantage of this, I suggest that you do. Many people do not know that you can negotiate with your credit card company and raise your credit limit and reduce you interest rate. If they seem reluctant at first, threaten to close your account. Make them believe that you can receive a better deal elsewhere. Better yet, have a better deal waiting and see if your current company can match it. If they claim they cannot, tell them that you will no longer do business with them and hang up. However, do not close the account because this would negatively affect your credit score. Instead, never use the card and see if your current company comes around.

Saving money on debt is possible; you just have to know where to look and what to do. Take advantage of these easy to use tips, and you will be debt free for less money in a faster time frame!