Debt Elimination For A Better Financial Tomorrow

Debt elimination is an important step for securing a better financial tomorrow.
Its important for securing your financial future - if there is no debt elimination, then there is no capital to build upon. With debts mounting, one can't save or invest for the future. Therefore when you really require money for the future, there is none for you. Money depreciates in value as inflation continues to rise. Therefore the same amount of money will not buy the same amount of goods and services in the future.

Securing the future of the children - if you have family obligations, whether they are children or your parents, you would want to give them a secure future. This means paying for your children's education, medical bills etc. In these situations, you would want fastest progress. After there is elimination of debt you can secure a future for your loved ones. Having a good credit rating - if there is no debt elimination, then you will have an adverse credit rating. This means that it will become difficult for you to apply for more loans and debts.

Banks and other lenders will be wary of lending to you. Even if the lenders give you loans, there will be a high collateral value or high interest rates. Thus you will be stuck in a debt trap. Where you will be borrowing just to repay the old debt. This is known as a debt trap, therefore its very essential that debt is eliminated, thus debt elimination gives you leeway to plan for your future. Debt elimination should be done continuously and with a conscious effort. Therefore don't take small debts as they add up to big debts. Try to make expenditures out of the available cash in hand, this means that you are not living on credit. Thus one should strive for debt elimination at the earliest.

The Debt Elimination Dilema

The total American consumer debt reached $2.4 trillion in 2006.

There are literally hundreds of ways to eliminate your debt. You can't turn on the TV, listen to the radio, open a newspaper or click on a web page link without hearing or seeing the latest miracle method to get you out of debt.

Some of these methods can actually be very effective. For example, a debt consolidation loan using the equity in your home can significantly reduce the interest you pay each month.

Others like debt settlement or debt negotiations can have a negative impact on your credit rating. Some companies promise to help you rebuild your credit rating after settlement but this is a slow process no matter whether they do it or you do it yourself. This method, along with bankruptcy should only be considered if all other options fail.

Before you consider any option to eliminate your debt you need to find out why you are considering this in the first place. Simply obtaining a loan or settling your debt is not going to solve the problem for most people.

The odds are good that once you have your debt under control you will start piling it on again. This is because most people take these actions without a plan to prevent this from happening again.

Another important point that you should consider is that for some there is no need to go through a 3rd party for help with your debt. It's very possible that you have all the money you need to pay your debts and other expenses and have the ability to impact the interest rates you pay.

I'm not just talking about a budget but a real plan for what you want your money to do for you. A budget is just part of the process. A real financial plan starts with setting your long and short term goals and working backwards from there. Every financial decision you make should be directed toward achieving your goals.

Your budget will simply be a tool to show you what you have and what your obligations are. Most importantly, it will put you in control of your finances so that you can make educated decisions regarding your spending and savings.

There is absolutely nothing wrong with consolidating your debt to get out from under those high interest rate credit cards. But if you are not careful you may end up with the consolidation loan payment and even more credit card debt.

If you are dead set on using one of the debt elimination methods to reduce your payments, take the time to consider what you are going to do differently in the future to make sure you don't wind up in the same situation, or worse in a year or so.

By: Terry Rigg

Getting Organized

The first step in any good budget or debt elimination plan is to get organized. If you are anything like me, you have become so overwhelmed with it all that you may have lost control. You may have no idea how much you owe and to whom. As everyone knows, if you cannot afford to pay a bill when it comes in, the next best thing to do is to toss it into a drawer or a box and ignore it.

My challenge to you today is to get organized.
For this challenge, you will need one of those portable file boxes and some 8-1/2" by 11" file folders (the more colorful, the better).

Step 1: First, go through all of those closets and drawers and boxes and pull out each and every unopened envelope and neglected bill and gather them all in one place. Once you have done this, I want you to go through and open them all, each and every one of them, and separate them into stacks by creditor.

Step 2: Next, organize what you have left. Go through each stack one at a time. Open up any unopened statements and start throwing away as much of this stuff as you possibly can, including unneeded envelopes and multiple copies of statements. Keep only what you really need, such as very important correspondence and the most recent invoice or statement relating to that particular debt.

Step 3: Finally, organize the statements and other papers in chronological order. Using one file folder for each different creditor, file the papers flat in the folder. You will then have one neatly-organized folder for each debt. Organize the folders in the portable file box. Keep out only the most recent statement for each debt and either paperclip this stack together or put it in a file folder of its own.

Avoiding debt is in many ways an emotional and psychological issue. When we feel overwhelmed by a situation, the effect can be to become so paralyzed that we take no action at all. By getting rid of the multiple copies of statements and collection notices and payment reminders, and keeping only what we need, we are left with a manageable stack of bills. We can then begin to deal with our debt situation one step at a time.

As we begin to address the issues of budgeting and debt in our lives, we may find ourselves needing to go through these same challenges periodically. Maintaining a good budget or a debt free lifestyle, like dieting, requires a lifetime commitment to change. It is far too easy to fall back into bad habits and to lose track. So, it is helpful to all of us to go back to basics every now and again and to reassess our financial situations.

I strongly suggest that you do something immediately toward taking this first step, even if it is only to go and pull your shoebox full of bills out of its hiding place under your bed. Any first step that you take right now, right this minute, will improve your chances of following through.

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