10 Tips for Eliminating Debt
Getting rid of debt is easy. Simply allot a sizable portion of your overhead income directly toward your debt, eat nothing but rice and beans, live in a 1 bedroom apartment with your spouse and 4 kids, and you're good! Clearly this is not the best way to go, but what can we do to eliminate our debt slowly over time in reasonable ways. Here are 10 tips for getting rid of your debt passively:
Sell your crap! By far one of the easiest ways to generate revenue to put toward your debt is by cleaning out those drawers! Many people have paid off significant debt just by holding a couple of yard sales. Even more extreme, sell a car if you have two! Joe Mihalic, did it and it propelled him to eliminate over $90,000 in student debt in just 7 months.
Eat less! Over 60% of America is obese or overweight, and people who frequent the internet are more sedentary than others, so this might very well apply to you! Debt reduction is a great opportunity to practice consumption reduction! Do you really need that gallon of ice cream? Do you really need that much processed food? Whole nutritious foods are cheaper and better for you. Instead of a $1.00 candy bar, grab a $0.25 banana.
Eat in! This one seems "obvious" to people but I don't think people understand how profound this can be. Suppose you have an evening in which you want to relax with your partner, so you decide to go out to dinner. On average, that's about $12 to $15 per head (if you're cheap). If it's just two of you, and you do this every week, that's about $120 per month. Why not share these evening making a relaxed gourmet, enjoying each others' personal company, and spending half the price. That not only puts an extra $60 per month toward your debt bills, but gives you more quality time with the one you love. It's a winning situation!
Sell your car! Now I don't mean no car for good here. What I do mean is, if you're making $45,000 per year and have a $25,000 car loan on a brand new car, you may want to think about your priorities! Your monthly payments combined with insurance are way too much for your income. Get a cheap, certified, $3,000 to $4,000 car for the time being, and clean up the other debts you have instead.
Build an emergency fund! This is a fantastic tip for those of you who use credit cards for unexpected situations: fixing damages to the house, fixing a car break down, an unexpected medical bill, etc. Building a small emergency fund of a few months of expenses will allow you to have a non-credit back up that will help you stay away from those high interest charges.
Demand better interest rates! The credit industry is astoundingly enormous, and generates revenue beyond belief. One company, just from credit card revenue, earned more than $1 billion in the 2nd quarter of 2012. These companies want your business. So if you're sitting there with a $25,000 maxed out credit card at a 21% interest rate, demand your company lower the rate, or find another company that'll offer you a better rate. It won't be hard. I get ads promoting credit cards all the time in the mail. Better yet, call your credit card company and other companies and ask for incentives like 6 months interest free if you transfer your balance. No point paying that extra money.
Get a library card! Remember that place that has books for free that you can borrow and return when you're done or get sufficiently bored? Yes, the library! This is a fantastic expenditure reducer for those of you who are avid readers. Put that extra book money toward the debt!
Stop using credit! This might seem like a completely obvious one until I ask you to do the following: pull out your credit card from your wallet, and cut it into pieces with scissors. Eliminate that false sense of security you have from it. I promise you, you won't even notice it's gone after a few weeks. What do you do if you need cash fast? Look at building an emergency fund as explained above.
Buy things with cash! I can't stress enough how great of a debt defeating tool this is. Take cash out of your checking account and use it. You'll immediately notice that it'll be much harder for you to spend the money than it would be to swipe a card for similar purchases. This will get you spending money more wisely, and will avoid you from swiping at your heart's desire.
Create a monthly budget! Each month, make a budget that plans out how you're going to allot every dollar you earn that month. Many people like to make fantasy budgets thinking every month is the same, but frankly it's not (winter months may mean winter clothes, cars need maintenance, etc.). Make this budget realistic by looking at how you've spent your money in the past. Now, cut down on some of the items you've been excessive with, and put a chunk of the remaining money toward your debt.
With these tips in mind, patience and time, you'll eventually get out of the debt you've amassed, and start living much more freer financially!