How to Successfully Overcome Debt

How to Successfully Overcome Debt

How to Successfully Overcome Debt

Overcoming debt is now considered to be one of the hottest topics when it comes to financial planning. In a world where individuals are struggling to find full time work, keep up with the escalating prices of items that are considered to be necessities, and adjusting to an unstable economy, more and more people are turning to various forms of credit to just get by, to just survive. As a result, the nation is not the only entity suffering from outrageous debt. People are also plagued by overwhelming amounts of debt. Financial planning to successfully overcome debt is no easy feat. You will need to work hard, have a high level of ingenuity, and will have to have a lot of self-discipline. In this guide, you will be provided with information pertaining to debt, and will be given some simple strategies on how to successfully overcome the debt that you have acquired within your lifetime.

The Traps

When engaging in financial planning for overcoming debt, you should be aware of the fact that there are two traps that most individuals fall into when it comes to accumulating debt. The first is that you are tricked into spending one more dollar than you absolutely need to spend. That one dollar could cost you up to four or five dollars, on a long-term basis because of interest. An example where you may spend a dollar too much is when purchasing a car. Many car dealerships will offer you a new car at the same monthly rate as a pre-owned vehicle; however, the interest is often higher, the payments are longer, and you end up spending more. By knowing about this financial trap and striving to avoid it, you may experience a large amount of savings.

The second trap is that you are encouraged to spend money – despite the fact that you do not need to spend any money at all. There are many different examples of these types of traps. As a parent, you may be encouraged to purchase an expensive school picture package, when really, you could take a gorgeous picture at home of your child and print out multiple copies for loved ones. When planning your vacation, you may be tempted to splurge on a week-long amusement park trip, when you could cut that expense in half or more by visiting less expensive attractions close to your home – such as natural parks, public swimming pools, museums, and/or natural hiking and bicycling trails. When items go on sale in stores – such as name brand clothing, electronics, and home furnishings – many will spend money just to take advantage of the sale. All of these activities and millions of others have the potential to result in a large amount of debt.

Becoming a Slave to Debt

The point in which you become a slave to your debt is the point in which the load of debt that you have accumulated actually dictates your life. If you are currently in a position where more than 5% of your total income is spent on the interest of the debts that you have accumulated, you are said to be in what many refer to as, “Debt Slavery”. This type of debt challenge is not to be confused with the classification of being “Poor”. If you are classified as being “Poor”, it means that you are deprived on an economic basis because you have very little in assets or very little in opportunities. A “Debt Slave” is a person that spends nearly all of the money that they make paying bankers, loan companies, and/or credit card companies for debts. If you are engaging in financial planning in order to overcome debt, you must understand that it is better to live with little than to acquire debt in an effort to live at a higher standard than you are able to live. By trying to enjoy luxuries that you are unable to truly afford, you will find that you become shackled by debt. While quite blunt in nature, becoming a slave to debt is a direct result of financial illiteracy, lack of financial planning, and a lack of self-discipline. The good news is, with a little knowledge, a little financial planning, and by becoming a bit more disciplined with your money, you have the capability of breaking away from the life of a debt slave.

Making the Most of Your Money

Money is considered to be the lifeblood of our economy, and of our lives. By removing just a bit from circulation, you will find that the economy is able to continue to function. The same goes for your life. If you take a little of the “lifeblood” out of your wallet, you will continue to function – at least for a little while. The problem is, without the proper financial planning, this “lifeblood” will continue to flow freely. Loans, credit cards, mortgages, and a wide array of other factors weigh heavily on the amount of money that slips from our hands and into the hands of rich bankers and officers. By using the following financial planning tips, you will find that you are able to retain more of the money that you earn:

  1. 1.      Make every attempt possible to avoid becoming a slave to debt. You should strive to save cash for the purchases that you desire in life, instead of pulling out a credit card or seeking out a loan. By purchasing a little less, you will find that you save a lot.
  2. 2.      If you have credit cards, you should avoid falling into the trap of believing that the “Available Credit” on those cards is the same as having cash stashed away in the bank. The amount that is available to you should only be spent on necessities. Examples include unexpected medical expenses, untimely vehicle repairs, and factors that are similar in nature. You should avoid tapping into the “Available Credit” unless it is absolutely necessary to do so.
  3. 3.      The next point that you need to be aware of is that every single purchase that you make on a credit card is the exact same thing as taking out a loan. You are simply “borrowing” the money to pay for your purchase and you will not only have to pay back what you borrowed, you will also have to pay back interest. The less you use the card, the better you will be in your financial planning to overcome debt.
  4. 4.      You should avoid indulging in the habit of becoming dependent on your credit cards. If you are attempting to overcome debt, you should hide the credit cards for six months at a time in order to readjust to utilizing cash. This will help you pay off a good portion of your debt and you will find that using the credit cards after the six month period is not as appealing as it once was. Once the six months has passed, you should only utilize the cards out of absolute necessity.
  5. 5.      You should sort the credit cards and loans that you have acquired based on the one that has the highest rate of interest to the lowest rate of interest. While you should pay on all of your credit cards and loans, you should put more money each month towards those that have the highest amount of interest first.

Conclusion

Financial planning to overcome debt is no easy task. The information contained in this guide is sure to assist with the endeavor; however, you may require the assistance of a financial planning company – depending on your income, your level of debt, and your knowledge regarding debt. There are many companies that specialize in providing information on debt reduction, education on the concept of financial wellness, and services for credit counseling. If you are ready to eliminate the shackles of debt that hold you down and want to walk away from being a debt slave, start these financial planning steps today so that you may enjoy many debt-free tomorrows as quickly as possible.

About the Author

Charl Oosthuizen
Independent Financial Advisor / Onafhanklike Finasiële Adviseur Ultrafin Finansiële Oplossings (Edms) Bpk / Financial Solutions (Pty) Ltd FSP 35757 Cell: 083 377 1441 | Fax: 086 617 8137 | Tel: 086 111 4602 Besturende Direkteur. Charl is sedert 1990 betrokke by versekring. Verantwoordelik vir oorhoofse bestuur van maatskappy, met spesifieke fokus op die Kort Termyn Afdeling as ‘n boer in murg en been lê die landbou vir Charl baie na aan die hart. Dus vorm Agri Versekring en gepaardgaande NIS produkte ‘n belangrike deel van Ultrafin se Potefeulje.

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