Friday, April 08, 2011

5 Ways to Get Out of Debt

Everyone’s looking for the best (and quickest) ways to get of debt. The problem for a lot of consumers trying to get their finances back under their control is that they’re so steeped in unpaid debt, they don’t know where to begin paying it all back.

Here are 5 tips from My Credit Group for helping you chip away at your debt:

1: Pay according to highest interest

I won’t get into the Dave Ramsay debate because yes, I agree there’s something to be said about making small, quick mental victories on your road to debt repayment. But this article is about getting out of debt in the shortest amount of time possible, not small mental victories. With that said here’s our recommendation.
List your credit cards from highest to lowest interest rates -- including their minimum monthly payments. Then figure out every single penny you have to put towards getting out of debt.
Start making the minimum payments on all your cards EXCEPT for the one with the highest interest. That one gets every available penny. Once it’s paid off, move on to the next. Rinse and repeat

2: Have a garage sale

I’ve never personally had a garage sell, but I’m a fan now. We are moving into a new office in 2 weeks, going from a traditional space with individual offices, to a more open, modern environment. So, it was the perfect excuse to ditch all the Cherry wood, executive looking furniture and redecorate with all looking modern couches and bean bag chairs.
 Now, because I’m lazy I voted we just donate all our old furniture so long as whoever was taking it picked it up so I didn’t have to deal with it.
Eventually, I was convinced to put it all up on Craigslist. I said fine, as long as I didn’t have to do anything (yes I’m that lazy sometimes). It was gone in two days and we made nearly $4000. In used furniture. Holy crap!
That kind of money could go a long way to pay off your credit cards or other outstanding debts. Do you have anything you could put on eBay or Craigslist?

3: Get all Abe Lincoln on Impulse Shopping.

Retail stores are experts at merchandising. They know exactly what to display and where to increase their chances of getting your money. Impulse shopping is one of the biggest killers of our bank accounts
I read a book on Abe Lincoln once where I learned Honest Abe had a habit of writing down anything he wanted to do when he was angry. He put those thoughts down on paper and locked them in a trunk for 24 hours and would later revisit those “impulsive” thoughts.
Apparently that 24 hour wait changed the course of history more than once. In fact, historians say that had he acted on those impulse thoughts, life today as we know it could be totally different. So the next time you see something you “have to have,” wait 24 hours before you buy it. It will still be there, but you might just find you don’t need it as bad as you thought you did.

4: Keep a monthly spending log

Last year we had a little experiment here at the office. Everybody was encouraged to keep either a little notepad, or handheld device with them at all times for a month. The purpose was to log every single purchase we made; right down to a pack of gum.
The results were pretty eye opening. Most of us don’t think twice about buying coffee, a pack of gum, a bagel or a little $2 ATM fee.
But after 30 days of logging all those little expenditures, the results might shock you once you add them all up. We encourage you to try it for a full 30 days. I’m willing to bet you’ll see an entire credit card payment’s worth of small little purchases you could have gone without.

5: Use coupons

Much like garage sales, I didn’t believe in clipping coupons. I shop for food pretty infrequently, and never really thought twice about bringing coupons along with me – even though my mom kept a vast coupon book which she took with her on her weekly grocery store trips.
Then I saw a show on TV about extreme coupon clippers who’ve turned the practice into a science. They showcased one lady in particular who brought over $600 worth of groceries to the checkout counter, and only ended up paying around $11 when all her coupons had been scanned and processed.

Now think about all the money you spend on groceries every time you make the trek to fill up your pantry. If you aren’t clipping coupons, you might wanna think about doing so before you throw out that Pennysaver.

This is a guest post from Marc Chase, President of Product Development for MyCreditGroup, a leading  credit services company.

1 comment:

Anonymous said...

Excellent tips! Just a realistic approach especially that almost everything can be paid in just a swipe of a credit card. But I think the most effective is to avoid having debts. Just spend what you can afford with your money on hand. Don't depend on loans and receivables. Just count how much you actually have at hand or in the bank.

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