Getting out of Debt
Getting out of debt should be your first priority in retirement planning. Creating and implementing an effective debt elimination strategy should be your first step in a retirement plan. Indeed you should take this step before you start investing or estate planning.
The good news is that there is no right way to get out of debt. There are many different strategies to achieve this goal all of which work. Unfortunately not all of the strategies work for everybody so try to ignore the patent answer advice offered by the financial gurus.
Instead, sit down look at your situation and come up with a debt elimination plan. The plan is simply a guide and not gospel, so be willing to change it. Most people will need several months of trial and error before they come up with an effective debt elimination method that works for them.
Devise and Implement a Debt Elimination Plan
Sit down and take a look at all of your finances including savings, debts, bills, income, etc. Then draw up a plan to pay off your debts. The best method is to pay off the highest interest debts first.
If you have three credit cards one which charges 20% interest, one that charges 15% interest and one that charges 10%. Concentrate your efforts on paying off the one with 20% interest first even if it means making the minimum payment on one of the others. Try paying off the higher interest vehicles such as credit cards and car loans first.
After a month or two, go back and look at your plan and see if you are actually paying off your debts. If not change the plan so you can pay off your debt. One method to try might be setting aside a percentage of your budget for debt payoff. Here are some handy debt payoff methods that might work for you.
Some Debt Payoff Tips
There are some simple methods that can you pay off your debts and more importantly get in the habit of always paying them off. Some of these include:
Concentrate on one bill or loan at a time. Many people have a hard time focusing on an abstract goal such as debt elimination. Giving your self something to concentrate on and visualize can make the process easier. Look over your bills and find one that you really want to pay off such as your highest interest credit card and concentrate on that. Seeing the amount owed going down on the statement each month can give you the confidence that can accomplish your goals.
Another good method is to simply double all of your payments every month. If you can afford it this is a simple and straight forward means of paying off debts. If you can't afford doubling your payments sit down and figure out what you can afford. Even paying 10% more can help you pay off obligations.
Savings and Debt Repayment
One trap that you need to avoid when paying off debts is not saving. If you have no savings you will have nothing to fall back on in emergency so you'll end up incurring more credit card debt. Save and pay off your debts at the same time and avoid using savings to make debt payments.
If you have a lot of money in your savings, leave it there and use your normal savings payments to pay off debts. If you have no savings or limited savings set a savings goal. Build up your savings to a certain level say $1,000 or $5,000 then implement a vigorous debt repayment plan.
Remember your debts should never be an excuse not to save. Everybody should have a certain amount of savings no matter how much debt they have.
The good news is that there is no right way to get out of debt. There are many different strategies to achieve this goal all of which work. Unfortunately not all of the strategies work for everybody so try to ignore the patent answer advice offered by the financial gurus.
Instead, sit down look at your situation and come up with a debt elimination plan. The plan is simply a guide and not gospel, so be willing to change it. Most people will need several months of trial and error before they come up with an effective debt elimination method that works for them.
Devise and Implement a Debt Elimination Plan
Sit down and take a look at all of your finances including savings, debts, bills, income, etc. Then draw up a plan to pay off your debts. The best method is to pay off the highest interest debts first.
If you have three credit cards one which charges 20% interest, one that charges 15% interest and one that charges 10%. Concentrate your efforts on paying off the one with 20% interest first even if it means making the minimum payment on one of the others. Try paying off the higher interest vehicles such as credit cards and car loans first.
After a month or two, go back and look at your plan and see if you are actually paying off your debts. If not change the plan so you can pay off your debt. One method to try might be setting aside a percentage of your budget for debt payoff. Here are some handy debt payoff methods that might work for you.
Some Debt Payoff Tips
There are some simple methods that can you pay off your debts and more importantly get in the habit of always paying them off. Some of these include:
Concentrate on one bill or loan at a time. Many people have a hard time focusing on an abstract goal such as debt elimination. Giving your self something to concentrate on and visualize can make the process easier. Look over your bills and find one that you really want to pay off such as your highest interest credit card and concentrate on that. Seeing the amount owed going down on the statement each month can give you the confidence that can accomplish your goals.
Another good method is to simply double all of your payments every month. If you can afford it this is a simple and straight forward means of paying off debts. If you can't afford doubling your payments sit down and figure out what you can afford. Even paying 10% more can help you pay off obligations.
Savings and Debt Repayment
One trap that you need to avoid when paying off debts is not saving. If you have no savings you will have nothing to fall back on in emergency so you'll end up incurring more credit card debt. Save and pay off your debts at the same time and avoid using savings to make debt payments.
If you have a lot of money in your savings, leave it there and use your normal savings payments to pay off debts. If you have no savings or limited savings set a savings goal. Build up your savings to a certain level say $1,000 or $5,000 then implement a vigorous debt repayment plan.
Remember your debts should never be an excuse not to save. Everybody should have a certain amount of savings no matter how much debt they have.
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