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How to be Debt-Free
All debt is unique and personal. It is important to understand that what may work for someone else may not work for you, based solely on different circumstances. That being said, the following practices should assist a consumer in reducing the impact of debt.
Prioritize your repayments
Determine which one of your credit cards or lines of credit has the highest interest rate. Work towards paying off the high interest rate credit first by applying extra money, while continuing to pay the minimums on lower rate credit.
Don't keep transferring your credit card debt
If you have a high interest rate credit card, it makes sense to transfer the balances to a lower rate card. But don't continue to transfer balances from card to card repeatedly. It's just a way to make you believe that you're reducing your debt, when really you're just lowering the interest rate you're paying.
Make a budget
Planning your budget is simply a way of defining your income and managing your expenses. Determine how much income you have left after paying for your basic needs (mortgage or rent, utilities, food) each month and apply that to your debt.
Pay more than the minimum
Although minimum payments seem appealing, these small payments could result in many years to achieve full repayment. The minimum normally just covers the interest, making very little impact on the principal. Start with paying double the minimum and increase it every month until your debt is paid off.
Pay off debt before building emergency cash fund
Money saved in the event of an emergency is good to have, but it doesn't make sense to put money in savings earning at most 3% interest when you are carrying credit debts with higher percentages. Put your extra cash into paying off your debt instead of trying to build up your emergency cash funds.
See a financial counselor
If you feel overwhelmed by your debts and are worried about your financial situation, a financial counselor can help. A counselor will assess your debts and will help you budget and figure out a debt-free strategy.
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Did you know?
 Lenders consider more than just your credit score when deciding whether or not to extend credit. They consider the amount of debt you can handle given your income, your employment history, your credit history, as well as staying within their institutional underwriting policies.
Find out more information about your credit,
click here.
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