Debt, Debt and More Debt
Nothing will deflate your dreams of home ownership faster than a low credit score. Luckily, there are proven methods designed to reverse your negative credit score, and give you the economic privileges you deserve. You can, and will, build credit steadily over time if you apply the strategies in this article.
But First, What Causes Debt?
Before we delve into the mystifying world of debt recovery, we must first examine what causes debt. When you understand the cause of debt, you can prevent it down the line. It is impossible to achieve financial freedom unless you avoid the pitfalls listed below:
- The most obvious cause of debt is overspending and poor financial planning. The purpose of a $20,000 credit line is not to splurge your future on wasted luxuries, dinners and designer clothes. Money is a confidante if you must. It must be cherished, respected and managed, especially if it is borrowed from a major banking institution. When your income decreases, your living expense should decrease as well. Of course, some spenders do not abide by this simple rule.
- Sadly, divorce is one of the most prevalent causes of debt. Divorces are time-consuming and expensive, requiring legal fees, the loss of assets, and much more.
- In some cases, underemployment is to blame for debt. If your boss cuts your hours and pays you meager wages, you may struggle to make ends meet as a result. Sometimes, the underemployed give in to predatory lenders to meet their basic needs.
- Gambling is yet another major cause of debt. Described as addictive and intoxicating, gambling can easily destroy your savings and your family’s future.
- Payday loans can trap you in a suffocating, never ending web of debt. Laden with 500% interest rates and strict repayment dates, these loans can easily hurl you into a state of financial ruin. So beware.
- Some people lack a basic financial literacy. This is not an inborn trait, but rather, one we must all learn. A simple book or finance course can inform you on the way money is invested, and the way it grows. You can decrease your chances of debt by increasing your financial knowledge.
- Some people abuse money irresponsibly. They expect an inheritance, or a bonus, so they blow their savings in one trip. This should be strictly avoided.
- When medical issues arise, they take precedence, and money as well. This, however, is understandable. If you have a life-threatening condition, and you need surgery, then your health and medical expenses should come first. Of course, you can prevent this, to some degree, by maintaining a quality, health insurance plan, which will offset expensive medical costs.
- Poor saving habits are yet another major cause of debt. What happens when a sudden car, medical or personal emergency occurs? Unless you have a solid savings account in place, you may have to pocket money elsewhere (predatory loans).
Five Easy Steps To Get Out Of Debt Fast
Now that we have explored the dangerous pitfalls of debt and overspending, we are on to brighter and better things. Below, you will find a list of 5 proven steps, designed to get you out of debt fast..
Step 1: Stop borrowing money. The world is replete with short-term and long-term loans, just waiting for the next unwitting borrower to appear. If you are determined to be debt-free, you must consciously decide to stop taking money from lenders. The more money you borrow, the more money you will owe. Stop applying for credit cards, payday loans, store credit, or anything that equates to more debt. P.S. That new boat you envisioned buying on credit is a bad idea.
Step 2: Create an emergency fund to supplement your vehicle, medical, veterinary or travelling expenses. A fund of at least $1000 is ideal.
Step 3: Plan your budget in advance. Review your existing statements and determine where and how you are spending your money. Determine what you need and what you do not need. Cancel any subscriptions, purchases or bills that are unnecessary. Opt for more cost-effective alternatives and budget accordingly.
Step 4: Next, create a plan, in which you outline precisely how and when you will pay off your debts.
Step 5: Whenever you have extra money, use those funds to pay off your debts. There are occasions when you will have extra money to spare. When this occurs, do not spend it on the latest luxury or gadget. Pay off your debt instead.