How You Can Get Out of Debt

If you're planning on retiring young, the first "order of the day" would be to see if you can. One of the indicators to know when and if you can, is if you don't owe so much - as to require that you work until past retirement age of 65. If you do, then you have to start trimming, if not eradicating these liabilities.

The feeling is so familiar: bills are piling up, you're so far behind. You do everything else to distract yourself by watching television, eating junk, because you can't bear to open them. And when you do - you realize what you felt in your gut all along - you only have enough money to make the minimum payments, and only for some.

In this day and age where recession has become a buzzword, you have plenty of company. The average family is now carrying between $8,000 and $9,000 in credit card debt alone. Or if you're a Filipino, you've maxed out your credit and is not making a dent on your principal. This generation owe more on our homes, cars, and educations than any previous generation has. There however is hope.

Here's a plan, to help you get rid of debt, or at the very least, make it manageable so when your postman comes knocking, it won't feel like a horror movie scene.

Ready, get set?
Let's get started.

1. Take stock.
Alone or with your mate. Sit down and make a list of whom you owe money to, how much you owe, and what rate of interest you're paying on each of those debts. You will know as your gut's already telling you it's the credit cards that are the main culprits. Specially those with the highest interest rates.

2. Get rid of all but one or get a better credit card deal.
It's not a crime to ask. Pick up the phone, call the toll-free number on the back of each card, and ask if there's anything they can do to lower your current rate. According to experience and a lot of studies this simple act of requesting, achieves success more than half the time. Then, try to consolidate your debt onto a single card with the lowest interest than what your current cards are charging you. There are a lot of credit cards offering to facilitate transfer of debts to their cards with no fees and at a fixed interest rate of your whole debt. This will lower your monthly payments. 

3. The first two steps is a prelude to ordering you to: Track and slash your spending.For the next 30 days, keep a detailed record of where your money goes. This can be done with the help of computer programs like Excel or Quicken (a program specific for tallying expenses) or by simply keeping a tally in a journal. Every time you shop, save receipts for all the items you buy — even the "petty ones". Then, at the end of each day, record and sort your expenses — medicines, coffee, snacks, etc. It may come as a shock to you, when you total the columns at the end of the month, how the little things add up pretty quickly.
Categorizing, shows you - your weakest spending habits. Would you have guessed you spent $ 300 on snacks and coffee a month? Now that you're aware of it, you can make the decision to either cut back or pack snacks to-go from now on. The money you will save should you decide to, can be put into a savings account specifically  earmarked for paying debts.

4. Know what utilities you can and can do without.
These are for the larger bills you pay monthly. Your land and cell phones, internet service, and utilities, as examples. Again, call the provider of each service and ask if there's any way to lower fees. For instance, some people don't use their land lines anymore and some providers have mobile landlines with free minutes both for calls to cell and land phones. Also you may want to consider bundling internet, cable, cell and land lines. Or you can ask your cable operator for a lower fee with specific channels you and members of your family actually watch.

5. Check and ask if you can get lower rates on your HOME and CAR loans. Explore whether you can lower your interest rate on your house and car mortgages. Check with other banks, ask around and your local newspaper for a listing of current mortgage rates. I've done this before with resounding success. If other banks are offering a percentage point less than the rate you're currently paying, consider refinancing. Likewise, compare the rate you're paying on your car loan with the rates available on used-car loans. If you can save a point or two, refinance that loan as well.

6. Pay Cash.Yes. You read it right. If you're off to go grocery shopping. Leave your credit cards at home, with a list on hand, get enough from the ATM machine for the purchase. Or go DEBIT. Where payments are taken out of your savings account automatically. Stay within that budget and fight the urge to go window shopping. Believe me, you will feel better after you've done this for a month. Also pay your bills as they come in rather than once a month. Why?  Because paying bills as they arrive gives you a chance to see — in real time — what you're spending. Almost like paying cash. For instance your telephone bill is higher than usual because of you got carried away with calling long distance. Practically everyone will spend a little less on other things throughout the month to compensate.

It may not be easy, at first. You may start and stop, but, IF you have your eye on retiring, at least, even from your mountain of bills. It's never too late or too early to begin - as it is said about life altering changes for the better.  Freedom, from debt. Liberation. It can be done.

Ruby S. Bernardo

I have added my photo here, to show how grinning from ear to ear looks like - when you've finally liberated yourselves from the shackles of debt