Learn the First Key Major Steps to Paying Off Debt

One of my favorite’s authors has a quote that says “A small debt produces a debtor; a large one, an enemy!” If Americans took this to heart, the credit card companies would be our enemies. I say this because last year 2008, the total debt household in America reached approximately 14 trillion. The 12 billion credit card industry would love us to continue to not pay off our debt, and continue to be in debt…

The total household debt hasn’t changed in this either because were continuing to see thousands of foreclosures and repossessions around the country. Unfortunately this was due to the debt fueled expensive lifestyle people were living like a few years back. I guess people forgot one of the basic principles in personal finance and that’s debt is a bad!

Don’t get me wrong, all debt is not bad, just 95% of it is. For example, borrowing money from a bank or mortgage company is the only way you will be able to purchase a house. Plus, owning a house (a house you can afford) comes with tax advantages and usually is a good long-term investment.

However, with the current economic situation and unemployment on the rise people today are finding that their living like the Jones expensive lifestyle has caught with them and now feel trapped in a dead end situation. They start dodging credit card company calls as their debt is raises every month. In the interim the credit card companies are jamming their customers with late fees, negative credit reporting, and much more. They realize their credit is ruined, and they see no way out.

Now here’s the good news….Getting out of debt is a choice, and if you accept that and go full steam ahead, you CAN get out of debt. Now, here is the bad news….To get out of debt, and become debt free most people will have to make significant and immediate changes to their current lifestyle. Basically, you can’t keep doing exactly what you’ve been doing and expect a different result….That’s insanity!

If you want to start having ultimate control with your financial life, you first need to make a list and gather up all of your fixed living expenses you currently pay monthly.

Now, when I say living expenses I’m only referring to your necessary living expenses. Your cable television bill doesn’t count as a necessary living expense. All those restaurant outings also don’t count as a living expense. I’m talking about your mortgage, heating, and electricity bill. All other expenses are usually discretionary and unnecessary and will need to be cut out. If you want to get out of debt, you will have to cut back on all luxury expenses. If not, odds are you will certainly never get out of debt.

Next, you will need to cease and desist all stuff you want to buy with credit.  You need to stop making all these purchases on your credit cards because they are not your friends. Just look at it this way- if a credit card is charging you 15 percent or more on every purchase you make. That would mean you are paying 15 percent more than the actual price of the item. The reality is that you could have used that extra 15 percent to eliminate some debt. .

Next step, you have to write down how much income you bring into your household every month. After, you need to jot down every single debt that you owe. Yes, it’s going to be painful, but again, it has to be done.

You now need to call up all of your credit card companies you have a balance with  and renegotiate. These days, debtors recognize that getting some money every month is better than getting nothing, and they are much more open to negotiation. So you need to figure out exactly how much you can afford to give each debtor every month, and get them to agree to it.

When you call, be polite, explain your situation and why you are behind in your payments, and tell them how much you can afford to pay.

You will be surprised at how receptive most lending institutions are.

And you will feel a huge weight off your shoulders as you begin the journey to paying off your debts and becoming debt free.