How can i live a debt-free life?
May 18, 2010 
6 Comments
Ava asked:
I’ve incurred a lot of debts that I think declaring bankruptcy is the only way. But I’m having several thoughts about it. Are there any alternatives that will help me get rid of debt?
I’ve incurred a lot of debts that I think declaring bankruptcy is the only way. But I’m having several thoughts about it. Are there any alternatives that will help me get rid of debt?
The only thing I can think off is get a few more part time jobs and ask a few friends to each put in a bit and then pay them back with your part time jobs but it could take years depending on how much it is
move to another country and start over.
Prepare yourself an income/expense sheet that will identify your current spending habits.
Knowing your own spending habits will help you understand why you are in debt in the first place, and where you can minimize unnecessary expenses. Things like new video games, fast food, movies are all unnecessary expenses.
I don’t know how much is a lot to you, for me if it is not within the 6 digits, then it is not a lot
It depends on what kind of debt and interest rate is on it.
Try paying off things that have the highest interest rate on them.
Pay minimum balance on all the smaller interest debt and only focus on the biggest interest rate debt. Once you paid off one thing, pay off the next.
For example, you have 3 maxed credit cards.
Credit card #1 : $5000 10% annual minimum pay:$100
Credit card #2: $1200 20% annual minimum pay:$50
Credit card #3: $4400 5% annual minimum pay:$75
In this case you pay off credit card #2, because it has the highest interest rate. So pay the minimum balance on credit card #1 and #3 and focus on paying off credit card #2. When credit card #2 is paid off, pay of credit card #1. Until you have no credit card debt.
Then you have to focus on paying off mortgage, car lease or whatever debts you may have.
Hope something helps
Well, the obvious is to stop spending and start cutting but its not as easy as it sounds. This is personal for me because I had some fair debt myself and I’ve personally witnessed one of my old buddy go through bankruptcy (not pretty at all). I know its a long shot but have you considered working with a firm to try and “eliminate” your debt? I had a $9000 credit card debt settled for a lot less… 30 cents to every dollar I owed less. It’s just a thought. Either way, look for the alternative that works for you and do some research. Ill leave the firm and my case managers info in the source. Other than that, good luck and I feel your pain.
Tally up what you owe and what you have.
Bankruptcy should be your last solution. Before you decide on declaring bankruptcy, consider these:
- Calculate how much you owe overall and compare it with how much you earn. From there, allocate your income accordingly so you can pay off your debt slowly.
- Make a list of all expenses and assess where you can cut back so you can increase your savings that could be used to pay your debt.
- Stop using your credit cards first or taking out any loan. Live strictly on a cash basis.so that you don’t add to your current debt. You’ll be forced to be frugal and purchase cheaper items. You’ll also be forced to buy only necessities if you employ a cash lifestyle (which is a good thing since you’re trying to catch up on your debts).
Basically, you should start cutting back on spending and focus on saving more. The extra savings should be used to pay off as much of your debt each month. It takes discipline but if you truly want to be debt free, it’s the sacrifice you have to take.