10 wise tips to tackle debt

Debt elimination or debt free life is everyone's dream, but how many of us think about making wise decisions to plan to balance the income and expenses to get "financial freedom"?

As I have mentioned before that to be "debt free" can be acquired by getting advice, tips and opinions from the people who had been in the same situation but could manage to get financial freedom or the experts of these areas.

Knowing and understanding debt is more important than ever. When used and managed carefully, debt can actually enable you to:
- Build a credit history
- Buy a house
- Send yourself or your kids to school
- Track and manage your spending.
Some debt, specifically your home mortgage, may even allow you to reduce your income tax. Understanding debt and using it wisely can help create a better, more fulfilling life for you and your family and can steer you toward a more stable future.

The "MasterCard" company site provides tips for debt elimination:

10 Smart Steps To Tackling Debt

It takes commitment and consistency, but the rewards are worth it—both financially and emotionally. People do it every day, and you can too. Here are 10 smart steps for tackling your debt.

1- Assess Your Debt—Understanding how much debt you’ve accumulated is the first step toward reducing it. Use Debt Checker Calculator to determine the total amount of your debt. It can be difficult to confront that total, but it’s critical that you do.

2- Set Your Goals—Set a big goal. Pay off your debt in three years and then break this goal into a series of smaller ones that will help you reach the finish line.
Use Income and Expense Cash Flow WorksheetPDF file to help get you there. You can even get your loved ones to participate and to motivate each other until you reach your goal.

3- Create Your Plan—Put the plan for reaching your goal on paper. The Debt-to-Income Ratio Worksheet and Debt Goal Worksheet may help you set targets for monthly expenses such as utilities, groceries, medical costs, household needs, and transportation. Set realistic targets and then try to spend even less. Make hard decisions about how to squeeze more of what you earn from your budget to pay off your debt. Don’t forget to budget for the unexpected, such as replacing a broken hot water heater or emergency medical treatment.

4- Track Your Spending—Using the plan you’ve developed, track your spending carefully so you can look for additional ways to save. The more money you can apply to your debt each month, the sooner you should be out of debt.

5- Curb Your Spending—Freeze unnecessary spending while you assess the problem and make plans to eliminate debt. Cutting spending can come in many forms. It may mean passing on buying big-ticket items, or it may mean bringing lunch to work or school rather than eating out every day.

6- Pay Your Most Expensive Debts First—Interest can add up quickly on debts of any size. Be sure to focus on paying off the ones with the highest rates.

7- Understand Interest and Late Fees—Know your interest rates and what the late fees are on all of your debts. Avoid late fees to ensure they’re not adding to your debt, and explore options for lower interest rates. If you can’t make a payment, call the banks or companies you owe and talk with them about your situation. If you don’t understand or aren’t familiar with a debt term, you can refer to our online glossary for help.

8- Pay More Than the Minimum—Understand how paying more than the minimum can be a critical step in reaching your goals. This is particularly true for credit cards, though it may also be useful for paying other loans, such as those used to buy furniture, appliances, or electronics.

9- Reward Success—Commit to achieving your goal and figure out what’s going to keep you motivated to stay on track. Consider sharing your goal with someone and ask them to be your “Debt Coach” then ask him or her to help “keep you honest” by checking in on a regular basis to see how you’re doing.

10- Be Patient—It probably took you time to get into debt, so acknowledge that you’re not going to get out overnight. Keep yourself motivated. And remember, debt elimination will change your outlook on life. It’s worth the hard work.

Source link: mastercard.com

Don't forget the rewards of Getting Out of Debt:

As you work toward your goal, increasingly, you’ll be able to plan, save for the future, and build wealth rather than worrying about paying for things you bought long ago.

While some of the benefits of getting out of debt are quite tangible, the biggest reward you will receive are those that are difficult to measure with a calculator.

Yes, developing good money management skills will provide you with access to lower interest rates, more favorable loan terms, or allow you work toward a goal such as homeownership. And while all those benefits are important, it is the intrinsic value you experience when you pay off your debt that makes the hard work worthwhile.

In short, while it might be easy to measure the value of paying off your debt by what else you can do with your money, the most valuable asset you’ll receive is the freedom a debt free life allows you to lead. Living without debt will allow you to focus on the most important people in your life — yourself and your family.