Eliminating Debt That You Do Not Need

Getting into debt is the easy part, it is eliminating debt from your life that is a difficult and often gruelling process. Grrrrrrr.

The number one reason that people fall victim to the devastating effects of debt is?

Unexpected and unfortunate life events. It is mitigating life circumstances that pull us under and threaten to keep us there.

It is a sudden illness or a long-term medical condition that leads to expensive medical bills (which is particularly traumatic for those who do not have medical insurance or do not have adequate insurance coverage). It is also loss of employment and divorce that can cause debt to take hold.

The sad reality of it is that while you may have gotten into debt through no fault of your own, it is your responsibility to climb out of the hole of debt that you have fallen into!

Eliminating debt is not easy and often comes at a price. But so does being in debt.

Hmmm, let us look at another problem that causes debt, especially for young people.

Do you need it or want it? That is the question.

Another issue that leads to debt is not being able to separate wants from needs. You NEED a place to live, food to eat, electricity, clean water and clothes on your back. You DON’T NEED the most expensive house on the block, designer clothing, a new car every couple of years and frequent restaurant meals. You want those things and there is nothing wrong with that but if you cannot afford them then you cannot afford them. Period.  Think about it. Constantly using credit to fund your wants will lead to trouble if your income cannot support the lifestyle you are earnestly pursuing.

Before you pull out your credit card to purchase that new outfit and that new pair of shoes for your date on Saturday night stop and think about what you are doing. High interest rates on credit cards are what cripple many otherwise well-meaning individuals.

If you use your credit card responsibly and pay it off in full every month then you will not incur any interest, however if this is not something you are able to do then think twice about using your credit card for frivolous purchases. If you shop with cash you are less likely to buy items you cannot afford, as the lure of the credit card will not overshadow your shopping trip.

Here are some tips to help you get back on track:

In order to eliminate debt that you do not need, always have awareness of the debts that you have.
  

Leave no stone unturned when it comes to understanding all of the debts that you have. Make sure you are aware of the balances of all of your credit cards and outstanding loans and get educated about interest rates. Find out what whether the interest on your credit cards and/or loans is deductible and also find out when and how these rates are subject to change.

Take stock of your bills and prioritize each one.

The items that are non-deductible include credit cards, personal loans and car loans while deductible items include mortgages and home equity loans. Student loans are deductible sometimes but not others so if you have one find out whether this is the case with yours or not. Take your bills and divide them into different piles and then methodically go through each one and rank it from the highest interest rate to the lowest interest rate.

Pay the debts you have with the highest interest rates first because those ones will cost you the most in the long run.

It is best to begin with the debt with the highest rate and typically a debt that is non-deductible and then go onto the next one, and so on.

If you follow these simple tips then you will be doing the debt free dance before too long! 

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