How to Get Out of Debt

1. Save Money - Create an emergency fund with enough to cover at least 3-6 months worth of bills. This will prevent you from getting into debt. For long-term goals create a savings account with a high interest rate and make plans to save for retirement.

2. Further Your Education - Take training classes or get a college degree to increase your skills set and salary. Plan to take at least one training course every year during your career to stay current with industry standards and technology advances.

3. Get Out of Debt – Get current on any late payments. Negotiate with creditors to setup payment plans and pay off debts older than 6 months. This will increase your credit score.

4. Get Your Financial House in Order – Organize financial papers and store in a centralized secure location. Backup financial documents and records saved on your personal computer. Use secure websites for processing transactions and storing personal information, i.e. bank accounts, automatic payments, etc. Organize your home office with file folders, file cabinets, etc. Make copies of all personal documents and store in a fire proof safe. Develop a will and designate or update beneficiaries for life insurance policies.

5. Trim Spending - Don’t live above your means. Buy needs more often than wants. Find ways to reduce expenses to help pay down your debts. Catch public transportation or carpool to work. Buy items or sale, use coupons, or shop at wholesales or thrift stores.

6. Limit Credit Card Usage - Use your credit card for emergencies only. Don't use your credit card to purchase gas, food or other everyday items. Keep credit card balances at 40% or below the credit limit. Pay balances off at the end of the month.

7. Develop a Flexible Spending Plan - Write a list of all of your total monthly expenses including debt and write down your total monthly income (net). If you have any money left over use that to pay down your debts. If you do not have any money left over look at the areas where you can reduce expenses.

8. Don't go into debt at Christmas - Don’t overextend yourself buying gifts at Christmas, buy gifts throughout the year to limit credit card usage and help spread costs for gifts over a period time. Even starting shopping in November will reduce costs and stress felt when shopping in December.

Most Americans accumulate the greatest amount of debt during the December holiday season. The holidays should be filled with joy and laughter not anxiety, pressure or guilty about spending money during the holidays.

 

If you don't have the money to buy gifts be honest and tell the persons who are expecting gifts just that. If you have a small amount of buy to buy gifts buy what you can and don't use your credit card to buy gifts unless you have the money to pay the debt off in two or three months. Here are 11 tips to help you save money during holiday shopping.

1. Don't buy gifts on Christmas eve or the day before Christmas eve. Selection is limited and lines at the register are longer.
2. Buy Christmas or holidays gifts during store sales in October or November.
3. Spend less money on gifts this year than you did the previous year.
4. Visit local vendors, you can probably negotiate a good deal on the same items you will find in the department store.
5. Think of creative gifts to give that you can make yourself.
6. Visit the local dollar store to find gifts for children.
7. Get a part-time job until Christmas arrives if need money to buy gifts (this will prevent you from using that credit card).
8. Buy gifts throughout the year so you don't feel overwhelmed with buying all of your Christmas or holiday gifts at once.
9. If you have to buy gifts for several family members try doing a "secret Santa" or "grab bag" so only one family member has to buy a gift for one family member and set a limit on the amount spent. That way everyone gets a gift and you don't have to worry about buying several gifts.
10. Shop online, some companies waive shipping and handling fees during the holiday season.
11. Make getting out of debt one of your new year's resolutions.

As a baby when you cried your mother or father came running to take care of you. As a toddler when you cried your parents hugged or talked to you until you stopped. As a teenager when you wanted something you talked really nice and sweet to your parents to get it. Throughout your life you may have received gratification instantly so as an adult it is only natural for you to believe that you should continue to receive this treatment. Unfortunately, this attitude affects every aspect of your life even your spending habits.

It can be difficult to resist the temptation of the instant gratification culture of America which I call the "instant grati factor". Advertisers make consumers believe everything can be obtained instantly by creating instant cereal, instant coffee, instant meals, instant messaging, instant credit card approval and online shopping. I have labeled this behavior as the "instant gratification syndrome" or "instant grati syndrome". To determine if you are a victim of "instant grati syndrome" ask yourself the following questions:

1. If you see an item online or in the store do you buy it immediately?
2. Do you buy an item even if you don't need the item or the item is not in your size?
3. Do you buy an item with your credit card even though you know you don't have the money to pay the bill when it arrives?
4. Do you get upset or defensive when someone questions your poor spending habits?
5. Do you rationalize your poor spending habits by saying things like "I work hard I deserve it", "Why can't I have it", "You are not my father, I can buy whatever I want", "I just had to have it", "I don't have to answer to you", "I want it now", or "I can buy it with my credit card"?
6. Is your home filled with unused items you purchased or items that still have the tags on them?
7. Do you go shopping with money already set aside to pay a bill?
8. Do you hide items you have purchased from your spouse, children or significant other?
9. Do you buy a new outfit every time you go to an event or gathering?

If you answered yes to any of these questions you are a victim of the "instant grati syndrome". Here are 6 ways to avoid the "Instant Grati Syndrome":

1. Make being debt free your ultimate goal
2. Stop listening to the instant gratification messages
3. Live your life like an investor
4. Surround yourself with people who are investors or people who are in a better financial situation
5. Enjoy the little things in life
6. Stop being depressed

This behavior is difficult to change but it can be changed. Don't buy on impulse - think before you buy and determine if the item is a want or a need. Embrace the old values of working hard and saving your money to buy something. So the next time you buy something with a credit card ask yourself, am I a victim of the "instant grati" syndrome?

When we are in debt we are powerless. Creditors have the power. They have the power to:

1. Close our accounts
2. Send us threatening letters
3. Harass us on the phone
4. Search our neighborhood to find people who have our contact information
5. Garnish our checks
6. Take us to court
7. Ruin our credit
8. Increase our interest rate
9. Charge us outrageous late fees, over-the-limit fees and annual fees

 

When we are in debt and have bad credit we are at the mercy of the creditors and have to agree to their terms. We beg and plead and silently say "don't close my account", I still need to go shopping for things you can't afford. Don't take me to court, I know I don't have the money but I am trying to keep up with everyone else and look like I have money when I am really living paycheck to paycheck or am almost bankrupt.   

 

We have to learn that everything has a price. What's your price? A nice pair of shoes, a Coach purse, a Hummer, a nice house in Bowie or Fairfax, designer clothes?

 

What are you willing to pay for those items? Will you sell your soul to buy that pair of Manilo Blanik shoes that you just have to have.

 

Unfortunately in this economy many people are in debt due to loss of a job, medical expenses or health issues.  I feel for these people who do not have enough money to buy basic necessities and have to use their credit cards to purchase those items.

 

Unmanageable debt can be prevented.  Instead of buying an expensive house or car, but a modest house or car.  Keep that for 3 to 5 years then you can upgrade once your financial situation improves. 

 

Know the truth before you sign over your soul for that shiny new credit card.