Getting and Staying Out of Debt

 

In the current economy it is much too easy for people to fall into debt. Between credit cards and bank loans it's easier than ever to get credit but it's only getting harder to pay back those debts. Unfortunately many people realize too late the perils of falling into debt. You might think being in debt is not such a bad thing but there is a price for living in debt and it's a high price. Plenty of banks and companies are willing to give you money at a high rate of interest. What are you getting for that interest? Basically nothing.

Although it does take some organization and work to keep yourself out of debt it is a lot less work than it takes to dig yourself out of a deep debt hole. The most important thing you can do is to keep good track of your finances. The first step to avoiding debt is to calculate how much money you make on a monthly basis and how much money you spend in a month. Add up all the money that comes into your household in one month. Then make a list of all your monthly bills. Make sure to include any loan payments or interest on credit cards that you pay every month. Also include all living expenses like phone, water, electricity, gas, food etc. Most bills are not the same amount every month so try to estimate your average bill. It is better to over-estimate your spending because under-estimating will give you a false idea of how far your money can go. You can always find more ways to spend money but it is hard to find more money once you've spent it. Another thing to remember is to include any bills you may pay on a semi-monthly basis. For instance if you pay for car insurance every six months, divide your bill by six to find out how much you pay on a per month basis. Once you've calculated your earnings and your expenditures compare the two.

If your spending is more than your monthly earnings this should be a big warning for you. Most people don't get into deep debt overnight, they slide into over the years until one day they realize their debt has become unmanageable. Remember that unexpected bills come along a lot more often than unexpected money so if you just ignore the spending and hope that it will all work out most likely you will just be watering your debt so that it grows. The best way to correct this situation is to reduce your monthly spending. Take a long look at all your monthly bills and see where you can cut spending. Are there any monthly services that you don't really need? Can you save money on grocery shopping with coupons? Deciding where to cut spending is a personal thing that only you and the others in your household can decide. Make sure you can get your spending below your income.

Remember debt is a relative thing. A little debt is not nearly as bad as a large debt. People are at all different financial stages so some people have more work to do than others. It can take years of work to get to be debt-free but it is well-worth the work. Lifestyle changes you make now in your spending will be compounded over the years to save you thousands of dollars just as reckless spending habits will compound a little debt into a huge debt. There are many changes you can make to improve your financial situation.

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