How We Can Eradicate Our Debts Effectively

There’s an old notion that a penny saved is a penny earned. Unfortunately, many of us have lost track of what it really means. We are now comfortable with the idea that we could pay later and buy now. The idea of financing has encouraged us to accumulate debt and this could start with many essential debts, such as student loans and mortgage. Many decades ago, we won’t see anyone purchasing a home with only ten percent down. Back then, people need to provide 50 percent down before they are approved for mortgage financing. Things have changed and it is far easier for people to apply for debts. It is actually good for consumers to be required to pay huge down payment before they are allowed to purchase a house. Today, people tend to finance more and more. Although we have less money, we can have more and more items. In fact, it is very easy for us to max out credit cards and choose more expensive cars based on specific payment methods.

We should be aware that the only one who gets rich off this situation is the bank. Nearly 20 percent of all expenditures are financed by credit cards issued by banks. Add in debit cards and retail cards, and the figure for all three rises to about 25 percent. It means that about a quarter of money we spend is processed by the bank. It’s an indeed bad situation for us and fortunately, we could actually avoid it with just a bit of self-control and planning. The problem is, many of us are lacking self-control and we should be aware of the problem that we have put ourselves in. Fortunately, there is some careful planning that we can do. As an example, we could use paper and pen to draw out our current financial situation. We should call the credit card company immediately if we don’t have a clue about the percentages. It is an important piece of details. We should write down everything that we are financing, that includes our house, cars, boats, dryer, washer and others.

Now, we should also write down any of our investments, such as IRA, 401k, saving accounts, property assets, stocks and others. If we have sizable amount of money invested anywhere, then it is good work. This should allow us to have a better outlook of our financial situation. However, while performing our plans, it is important for us to ask ourselves a few hard questions. As an example, w should look for the best way to eradicate our debts. We could start paying off debts with the highest interest rate. It means that if we have a couple of maxed out credit cards, one with 21 percent interest rate and another at 18 percent; then we should pay only minimum payments for the latter and allocate the rest of our money to pay off the former. Once we do this consistently, we should be able to pay off all our debts at the shortest time and the least amount of money.

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