There seems to be an ever increasing will to buy more then you can afford in order to keep up with the Jones'. This is the mentality that has put North America and many other countries around the world in their current financial predicament. Too many people have purchased houses that they couldn't normally afford due to the low interest and low down payment mortgages being offered by the banks. Another thing working against us is the 'wealth effect'. This happens when housing prices appreciate in value and that gives people the impression of greater wealth. And due to this, they tend to go out and purchase more and bury themselves further and further into consumer debt. And all this debt leads me to the topic of today's post, paying off this debt!

The best way to deal with debt, is to take a proactive stance. First and foremost, DON'T take it on! do you REALLY need it if you have to put it on your credit card or line of credit? In most cases, you don't actually NEED the purchase, its just something you want. There are always cases where you have to get something and you don't have the cash available in your account, and this is where credit cards and lines of credit are good things, but here is a good rule of thumb to go by. If you can't pay it off within the next month (before any interest payments will be added) then its best to save up your money until you can.

Ok, so you know its best not to get debt, but if the case arrives where you absolutely have to take it on, what do you do? Well, put simply, you pay it off first before anything else. Well, I shouldn't say before anything else, but lets elaborate. Before you get your paycheck, you should figure out how much money you need to put aside for rent/mortgage, utilities, insurance, food, gas etc. with this number figured out, as soon as you get your paycheck move it into another account or pay off these things right away, before you ever have a chance to spend it. Done. Ok, now that your basic living needs are met, what to do with the rest of your money, spend it? WRONG! Practically ALL of this money should be put towards your consumer debt. If you have multiple credit cards or lines of credit, always pay of the ones with the HIGHEST interest rate first. You will save more money in the long run by doing this.

At this point you might be thinking, that you need 'some' spending money through out the next 2 weeks, well, if you MUST have something, then leave yourself an allowance of $50 a week. Everything else should be put towards the debt. The way I see it, is you were already allowed to spend your money by racking up the debt load. Now it is time to pay it off, before you can have the ability to spend again.

Debt is not something to take lightly, with every interest payment, you are just wasting your money, practically handing it out to strangers on a silver platter. So remember, your best way to pay off debt, is to never rack it up in the first place, or if you have debt, to STOP racking it up until you can pay it ALL off. Your next line action is to route any and all extra money (once your basic living expenses are met) towards paying off your debt. With no exceptions, you may go months without any of the luxuries you had before, but the payoff at the end, (Not having any debt) is more then worth the little bit of time it will take you to pay it off.