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This year I have gotten set on implementing debt reduction strategies and getting entirely out of debt. So, recently I have been examining debt reduction ideas of some of the top, renowned Christian personal finance advisers. From what I read they all have a few tips in common.
Initially, each adviser recommends establishing an emergency fund of at least one thousand dollars. Having this specific emergency fund helps keep you from resorting to using credit when an unexpected emergency comes up. Some ways to create this fund quickly are to:
1. Sell some things that you no longer require or want;
2. Find one thing you’re spending money on each day and cut back on that investing or eliminate it altogether. One example would be to take your lunch to the office instead of eating out. Take the amount of money you would normally dedicate to lunch and combine it with your emergency account.
3. Switch your cash value life insurance to term life insurance. Move the cash that you will get back into the crisis account.
Next, it’s encouraged that you write down all your debts and include the quantity, the monthly payment amount, and the interest rate.
Here’s where things vary a little. Some advise that you use the snowball effect and also pay off debts coming from smallest to most significant. Others recommend you pay the debt with the highest interest rate first then work your way through every one of the debts until they may be re-paid. I’ve chosen to pay off financial obligations using the snowball technique because I need the particular motivation of watching debt get crossed off my list as quickly as possible.
Once you’ve got your plan of action, you must ensure you have a extra of money to begin implementing your debt reduction tactic. You will have to put together an allowance to see if you have any extra money to put your debt reduction plan into action. If you’ve got enough extra money, you can go ahead and start paying off your bills. However, when there is no surplus, you should start looking for places to generate some surplus.
A few suggested places to get extra are:
1. Obtain a second job;
2. Reduce your auto insurance rates by raising your current deductibles.
3. Temporarily halt 401K contributions;
4. Negotiate high interest cards into a second home loan; and
5. Mazimize your current tax deductions. Instead of having tax refunds annually, get the money in your current paycheck each pay period.
However you choose to get your surplus, it should be used to eliminate financial debt. These are just a few tips and methods that I hope you are able to use to get out of debt. What tips do you have for getting out of debt?
