Debt Elimination

How to Approach Debt Elimination
If you're in stress dealing with excess debt, it's time you choose a debt elimination program to help you avoid further crisis. It'll help reorganize your financial life and give you the chance to save a considerable part of your hard earned money.

To eliminate debt, first of all, calculate how much you owe in total. Then go for no-obligation free debt counseling with a debt relief company. Counseling helps in assessing your financial situation so that you'll come to know the right way out of debt.

6 Debt elimination programs that may work for you
Check out the 6 ways to eliminate debt and get an idea of how each option can work for you.


 * Debt Consolidation program: When you're unable to pay multiple debts, try consolidating all of them into one affordable payment. This can be done with the help of a Cebt Consolidation program.
 * Credit card debt elimination: There are 2 options for credit card debt elimination - debt reduction or debt settlement and credit card consolidation.
 * Debt reduction: This is a debt elimination program where a debt relief company negotiates with your creditors in order to trim down your outstanding balance. This works in the same way as a debt settlement program.
 * Credit card consolidation: This is primarily a credit card debt elimination program, which allows you to obtain lower rates on your Credit Cards. This in turn allows you to pay off your credit card bills in low monthly installments.
 * Bill consolidation: When you cannot meet payments on your medical bills, store cards, utility bills, you may choose bill consolidation as your Debt Elimination program.
 * Payday loan consolidation: If you're in trouble with your payday loans (pdls), and wish to avoid harassing calls from payday lenders, payday loan consolidation is what you may need. This will give you the chance to pay off your pdls and get rid of them through one manageable payment each month.
 * Debt management (DMP): If you have multiple bills such as credit cards, payday loans, student loans etc, you can eliminate debt by way of a DMP or a debt management plan.
 * Do it yourself debt elimination: The DIY plan is where you tackle debt problems on your own. You may either consolidate or settle your debts depending upon how much you can afford to pay. For effective DIY debt elimination, watch out for the 4 keys to getting out of debt.

5 Debt elimination mistakes you should avoid
While you're trying your best to eliminate debt, make sure you avoid making mistakes such as:


 * 1) Not following a budget: If you don't stick to a tight budget, you can't keep a track of where your funds are going and you don't know where you're overspending. So, make sure you plan a budget while you're on a debt elimination program.
 * 2) Canceling credit cards: You shouldn't cancel credit cards if you haven't paid them off. Instead, you can negotiate lower rates with the credit card company and pay off the accounts before you close them.
 * 3) Paying only the minimum: If you keep paying the minimum each month on your credit cards, it'll take a long time before you can actually pay them off. This is because the minimum payment includes mostly the interest. So, if you don't pay more than the minimum, you won't be able to reduce your outstanding balance.
 * 4) Falling into scams: Debt elimination scams are something you should be careful about. Such scams are carried out in 2 ways:
 * 5) Debt elimination letter scam: This is where a debt elimination agency sends you a letter which you can show your creditors and have your bills eliminated. In return, you'll have to pay a large fee to the agency. Bond for discharge of debt or Redemption certificate is the name given to such a letter which claims the debt as void just because many fees charged by creditors are illegal.
 * 6)  Stealing your personal details: This is where you come across an internet ad promising to resolve your debt problems. They'll ask you to provide your personal details along with certain fees. In return they'll offer you a document that is expected to release you from your debt burden. But your debt actually exists and the scammers have stolen your identity using which they can commit other types of frauds.
 * 7) Using credit cards instead of cash: Most often you spend more when you use credit cards instead of plain cash. You need to change your perspective on the use of credit. Try to avoid making big purchases, that too with credit cards as otherwise it will add to your debt.

With debt elimination programs, you can get rid of your bills and avoid harassment by creditors and collection agencies. All you need to do is, create a realistic budget, choose the right program and make payments on time. You can thus get out of debt and have better control over your money.

How to Live Debt Free Forever
Now that you've reviewed some of the personal reasons you've found yourself in debt, and taken some drastic measures to attack your debt, it's time to develop a plan to determine where all your money is going, and develop a healthy financial strategy. You must be able to account for every penny you spend each month. Don't worry, you won't have to cut your spending yet. Here's a simple method to develop a plan which may fit your comfort zone.

Step 1
Take a sheet of paper, and write "Master Budget" at the top. On one side, list all your relatively fixed expenses (mortgage/rent, telephone, electric, water, gas, car, credit card minimums, etc.) Better yet, if you have a smart phone, there are tons applications online you can download to track your expenses and make a budget. A nice thing about using a smart phone is that you always have it with you.

Step 2
Now comes the tough part. You must estimate how much you spend on various expenses like food, eating out, entertainment, stuff for the house, school, clothing, car repair, gasoline, etc. If you have old receipts, you can use them as a guide for real expenses.

Step 3
Track all your expenditures for one month. At month’s end, total each category, and you’ll know exactly how much you spend on everything.

If you're not using a smart phone application, you'll need to carry your budget notebook where you go. Carry this notebook with you wherever you go. Be very detailed on your categories. For example, one category might be "Eating Out." Under this heading, write down the date, description, and the dollar amount for each time you eat out.

No matter how you do it, tracking your expenses allows you to see exactly where all your money is going. If you don’t know where your money is going, how can you expect to control it?

After you’ve totaled your categories, transfer them and their respective expense totals to your "Master Budget" spreadsheet.

Step 4
List your take home income after taxes on your "Master Budget." You might want to develop two different budgets based on your two pay periods. Should you pay the phone bill on the 1st, or would it be better to pay it on the 15th? What I find is that one pay period usually has a tighter budget than the other because you have to pay the bigger bills like your mortgage, rent, car payments, etc. Step 5

Now the challenge begins. Balance your income and expense categories, so you stay within your budget. Leave yourself a $200 cushion in your account. Take a long hard look at your expenses and see how you can reduce them. Let’s look at the category of "Entertainment." which may include dinners out, movies, movie rentals, plays, etc. Let’s say you’re currently spending $75 per weekend on eating out and entertainment. That’s $300 per month. Why not only spend $100 and take $200 to make a larger payment on one of your high-interest credit card bills?

You may be shocked to realize how much you spend on little things. For example, if you spend $2.00 per day on gourmet coffee, you spend $40 per month just on coffee. Why not buy a nice coffee maker, and make your own, or at least have coffee out only once or twice a week?

You’ll have to play around with the amounts you set for your expenses categories. You don’t want to completely cut out your fun. Otherwise, you’ll give up on your budget completely. Cut back a fair amount, and see how it feels. Adjust as you go. Ask yourself questions like:


 * Could we sell our home and buy or even rent a smaller place until we get back on our feet financially?
 * Should we move to a different area where housing is less expensive?
 * Do I really need to buy premium gas?
 * Why not wait and rent a movie, instead of paying $10-$12 to go to the theater?
 * Do I really need all those magazine subscriptions?
 * Do I really need those movie channels? Could I live without cable TV?
 * Do I really use my bottled water service? What are some cheaper alternatives?
 * Do I really need a new dress, suit, purse, jewelry this month?

How you answer these questions all depend on how quickly you want to get out of debt.

Step 6
By now, your Master Budget should list every category where you money goes. When you start living out your new budget on your the next pay period, enter into your spreadsheet (paper or electronic) the individual amount you have allotted for each category at the top of its own page. Think of each category page as a mini-account log. Every dollar you spend must be categorized and deducted from its appropriate category account balance.

If you're recording expenses in a notebook, remember to carry your notebook with you everywhere. If you're doing it on a smart phone, you will probably have your spreadsheet with you at all times.

When you get to zero in one category, you can’t spend any more in that area! However, what you’ll find is that you have other categories that have money left over at the end of your budget period. You can roll these amounts over to categories you've zeroed out, or better yet, use those extra dollars to hammer away at your debt. Revisit your master budget and adjust it accordingly.