How to start knocking out debt
No one likes to be in debt. It's fun to spend money but it’s not fun to get harassing phone calls from debt collectors. Companies offering to help you get out of debt fool many people. Don't be fooled. Oftentimes they are taking a big chunk of your spare change. And, being in debt, you don't have any change to spare. The first step to getting debt help is to learn to help yourself. Create a budget. Don’t accumulate any more debt, whether it's good debt or bad debt. More about the differences between good and bad debt later.
Use cash, not credit
Many companies offering debt help will say having debt is good because it helps keep your credit report looking good. The truth is, if you are in a lot of debt, you should switch to a cash-only system until you get your finances in order. Use cash to purchase everything. Use money orders from your bank for items that have to be mailed. You can keep a receipt.
Get a handle on your situation
Take an inventory of all of your bills and the money you owe to friends, family and credit card companies. Write two columns: one for bad debt and one for good debt. Bad debt includes credit cards and bills reflecting items that have been used and are now gone. Good debt includes a house, a car or any valuable items you could sell. Remember if you declare bankruptcy, you can get rid of much of your debt, but you cannot get out of paying college loans.
Negotiate on your own
You don't need a debt help company to negotiate better interest rates. Call your credit card companies on your own and ask for lower rates. Explain your situation. Take advantage of opportunities to move your higher interest rate balances to those offering zero percent interest. Make sure to track how long you will receive zero interest. Also read the fine print to make sure you won't end up owing any accumulated interest on any cards. Finally, take a closer look at your budget. The truth is you will never stay out of debt or get out of debt unless you learn to budget. Live below your means starting today. And you will never look back.
