Hispanic.com: Free From Debt
What is Debt…Que Es?
Ah, the million dollar question (literally!)…How do you do it?... Get out of debt? Is there some big secret in the sky that all those financially well-off people know about that the rest of us don't know? Well the answer to that is…NO.
Debt is really a simple topic at the essence. Make more than you spend and owe, and you'll avoid being in debt- it's that simple.
You Are Not in Debt
Your Paycheck - Spending = + $Cash Flow
Si…You Are in Debt
Your Paycheck - Spending = -$Cash Flow
Who Gets into Debt?
Debt can happen to anyone. So don't feel bad if it is happening to you. It is just one of those things that can occur due to life circumstances. The key is being confident and having a plan to get out of debt. It can definitely be done.
Things to Watch for
- Compound interest - compound interest can really eat up your money. This is how credit card companies really make their money, and why you hear those stories how it can take up to 10 years to pay off $100 in credit card debt, making minimum payments….Crazy stuff!
- Double-digit interest - any debt over 10% in interest is generally a lot, and you need to prioritize getting this debt paid off, double-digit interest can really grow over the long-term and create some stiff payments.
- Too good to be true- some debt relief companies promise to get you out of debt in 30 days, or that you can be debt free without paying a cent… well, unfortunately as this maybe it's probably too good to be true.
Good Debt VS Bad Debt
- Student loan debt and interest- this will pay off in the long run, and is a tax write off
- Home mortgage - this too will pay off the long run, and is a tax write off
Take Action and Get Out Of Debt
- Stop the credit card spending- This is perhaps the most important thing it can do. Credit cards can virtually eat up your finances. Do whatever you have to do. Cut them up. Start cutting coupons. Stop eating out. Don't buy anything new. Shop at thrift stores. Do whatever it takes to stop using those credit cards.
- Pay more than the minimum on credit cards- Paying the minimum payment will take forever to pay off. Make it a priority to pay off the credit card debt. Do it!
- Tempted by the credit card offers in your mailbox?- You can stop them. Dial 1-800-5-OPT-OUT.
- If you really need a credit card find a low rate credit card- Do some research, sites like www.bankrate.com can help with this.
- Pay off the highest interest rate credit card 1st- Plan it. Do it. Then pay the next one with the 2nd highest interest rate, and continue on in that method.
- Reduce interest rates- Talk to your credit card company and negotiate a lower interest rate on your credit card. It especially helps if you've been a long-time customer or have been making steady payments over the long-term on your credit card.
- Consider consolidation- Can you consolidate your debts onto some of your lowest credit cards? Or perhaps consider some other consolidation plans?
Get Motivated…Si Se Puede!
Living on a strict budget over the long-term is tough. So give yourself a break every once in a while….a reward per say. Set up some goals, such as saving $500 in one month, successfully paying off one credit card, closing out unneeded debt, and then set up a reward. Perhaps go to a movie, hang out with a great friend, spend time doing something you really enjoy.
Road Bumps
What happens if I can meet my spending plans this month? I wanted to pay that credit card off that I couldn't do it this month… I couldn't pay as much of that debt off as I wanted to.
What Are Your Rights?
Debt happens, so just relax… you will solve it.
- The law says that collectors can only contact you between 8 a.m. and 9 p.m.
- You will not be thrown into jail- if a debt collector tells you that it is a lie. Owing money never means jail time, and the only way your wages can be garnished it is through legal means.
- If you feel like a debt collector is using illegal means or been threatening, take control and tell them you will submit a complaint. Also, it never hurts to get familiar with the laws, it can only boost your case- especially if a debt collector's is being threatening.
- A debt collector may sometimes try to call you or contact you at work. You can stop this if you write and request to not be contacted at work.
- Additional information on dealing with debt collectors can be obtained from the Federal Trade Commission at 1-877-FTC-HELP or at http://www.ftc.gov/bcp/conline/pubs/credit/fdc.htm
- Need a good credit counseling service-be careful about paying anyone a lot of money. There are places that offer free or low-cost services for debt counseling. Where should you start? The National Foundation for Credit Counseling (NFCC) is a good place to start. It contains a listing of centers around the country. Call 800-388-2227 to find out about centers near you.
Well… again… it's okay if perhaps one month you fall off the wagon...a little bit, especially if you consider it a lesson learned and resolve to do better next month. Just don't give up, and start collecting debt and spending again… that is the worst thing you can do. Dust yourself off, and just formulate a plan to do better next time. You can do it! Becoming debt-free is just a matter of time and determined effort. Si se puede!
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