Bury The Debt Monster: Part One
In this series of articles, you will be able to follow along at your own pace as you work to bury the debt monster and regain complete financial control. Whether you were like a child in a candy store or you simply spent a little more than you made every month over a long period of time, your debt can be crippling- and effect all other aspects of your life. Use this series of articles to turn it all around!
Lesson One: Opening Your Eyes
Many people don?t know how much debt they have, and whether or not they have a good balance of ?good? and ?bad? debts. Most people who have the most debt try to ignore the extent of debt they are in- in other words, they avoid reality because what you don?t know doesn?t hurt you, right? In this case, unfortunately, debt always hurts you over the long term!
The first lesson on the road to self-debt reduction or elimination is to understand how much debt you actually have, and what type of debt it is.
Make a List
Let?s start with the ?bad debts?, since these are the ones we will want to pay off as soon as possible. Bad debts include store credit cards, car loans, and charge cards- any purchase that loses value instead of offering you potential earnings.
On a piece of paper or on a computer spreadsheet, set up your list like this:
Name of Card/Loan Amount Owed Interest Rate Estimated annual interest
Ex: Citibank $2,123 18.36% 2123 x .1836 = $389.78
Next, do the same thing for good debts. Good debts are things like school loans, mortgages, second mortgages, and other investments that may earn money. We will use your good debt list in a future lesson, but for now, let?s take inventory of everything you owe on two separate lists: ?bad? and ?good?.
Analyze Debt to Income Ratio
Once you have both your lists completed, you?ll want to analyze the amount of bad debt you have. Get a total amount of the ?amount owed? column of your bad debt list and compare it to your annual after-tax income. The bad debt total should not be a large chunk of your income. You can find your debt to income ratio (and we?re just dealing with bad debt at this time) with a simple formula:
Total Bad Debt / After-tax income = bad-debt-to-income ratio
If you?re total bad debt is $5,770 and your after-tax income is 36,000, you would have a bad-debt-to-income ratio of 16%. The goal is 15% or less in order to keep your payments manageable.
How Much You Actually Flush Down the Drain
Now, for a real eye opener, add up the amount of estimated interest you pay annually on your bad debt accounts. WOW! While student loans or mortgages are considered debt worth paying interest for, look at how much money you are flushing down the drain each year on your credit card and car loan payments. Think about what you could do with that extra money on an annual basis!
Lesson one has probably been an eye opening experience overall for the majority of you. The first step for alcoholics and drug addicts is to admit they have a problem- the first step for people looking to get out of debt is to face the debt monster and see exactly how much money they owe. The next lesson will lay the foundation for eliminating the worst of our debts: credit card debt.
This article has been provided courtesy of Destroy Debt, http://www.destroydebt.com .
Related Articles:
Get Rid Of Your Student Debt Faster: Government Student Loan Consolidation
The main problem students and graduates have to face today is the repayment of their student debt. In order to pay their way through college almost everyone resorts to student loans. But when the loan payments pile up and due to interest rate variations they became an unbearable burden, the risk of default becomes present and Debt Consolidation ought to be considered.
Assess Your Financial Attitude and Eliminate Your Debt Forever
Want to know if your attitude towards your finances is helping you or damaging your future? Take this Quiz and find out..
How to Choose a Debt Consolidation Loan?
If you have decided that a debt consolidation loan is necessary, then you have made a big decision. In order to choose the right debt consolidation loan for you, you need to take the time to research what is available versus your needs.
Debt Consolidation Loan: Make Sure You Look For A Reputable Lender
A debt consolidation loan can certainly stop financial bloodshed and give you time to recover and regain your financial health, however, the key to successful debt consolidation is finding the best loan for your needs. It is therefore important to borrow from a reputable lender who has a track record of providing solutions to debt related problems.
Choosing the Right Debt Settlement Company
A Google search for ?Debt Help? will generate page after page of financial service companies offering different solutions to help you get out of debt The various ?Debt Help? options are generally Debt Settlement, Credit Counseling, Debt Consolidation, and Bankruptcy
Bhupinder S Sood CPA Announces Personalized Debt Personal Finances Counseling to Individuals and Businesses
PERSONAL LINE TO THE CPA is a new service offered to individuals/businesses to get through this tough financial climate. Small businesses and individuals sometimes do not know who to turn to for good, honest advice.
The Truth about Bad Credit Debt Consolidation
You've probably seen the ads for bad credit debt consolidation. Even if you're in debt up to your ears and haven't made a payment in months, these companies claim they can help you consolidate your debt in spite of your bad credit. After they have worked your magic, you'll be left with, "Just one easy monthly payment!"
Get A Debt Consolidation Loan Online - End The Frustration Of Not Having Enough Money Each Month
Your income each month rarely changes. If you get a raise or lose a job or get a new job, your income changes, but short of that, your income is usually pretty stable. Your debts, on the other hand, can rise each and every month until you get to the point that you can no longer afford those debts on the income that you currently make. Some people will turn, surprisingly, back to their credit cards for help. They will use one credit card to pay the monthly balance for another. This will further the problem and eventually there will be no more credit to borrow from, but the monthly bills will still be there. When this happens, frustrations rise to boiling points. You want to pay your bills, but things have gotten out of hand and you?re at the...