Constantly Planning to Get Out of Debt

Written by Amelia Gordon on January 20, 2012 – 4:24 am

Having a constant plan to get out of debt will help you keep your finances in order,
When you keep your focus on your debt and
money situation, you are able to better control it.

Most advisors will tell you that you need to be debt free. Yes, that is the
ultimate goal, but for many people, it isnt exactly reality. There are situations, like buying a home, in which you have to
accept debt.

There is good debt and bad debt. Good debt is debt you can afford and bad debt is debt you cant afford. Thats all
there is to it. If you can afford your mortgage, car payment and RV payments, then it is alright. If you cant, then it isnt
good debt.

When it comes to credit cards, however, they are bad debt, regardless. You will eventually reach a point where you
cant afford them. That is almost guaranteed.

The key is to constantly work to paying off your debt. Start with your credit cards and high interest loans. Focus on paying off
the cards with the highest interest rates to start with. This will save you money inthe long run.

Once you have all of your credit
cards and personal loans paid off, start working towards your autos and student loans.

I like to focus on what has the lowest balance to pay off first. This helps you knock things off rather quickly adding
to your gratification. If everything is about equal in balance and interest rate, I pick the highest monthly payment.

When you
pay off a high monthly payment loan, you free up more money to put towards the next debt.

When you have your cars and student loans
paid off, the next thing you have is your mortgage. You can be working on your mortgage throughout the process as well. By adding
as little as $100 a month to the average mortgage, you can knock several years and thousands of dollars off the mortgage.

Thats
the overall game plan.

Be aware that it can change.

For example, you may find that you are in a situation in which you must have a new, reliable vehicle.
You dont want to spend your emergency savings. The only debt you have is your mortgage. You are able to afford the monthly
payments, yet plan to pay it off as quickly as possible. Then go ahead and finance a reasonably priced vehicle. Transportation
is very important for work, school and other obligations.

What you must do is adapt your debt-reduction plan around the new car
payment. Although you have added debt, it doesnt mean that you still cant work to be debt free.

Financialmanagement is built around the idea that you must be flexible and able to adapt to the situation with smart choices.Many
people believe that there is a right way and a wrong way. That isnt necessarily true.

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