The objective of this article on Debt Elimination Techniques is to give the reader the basic skills they need to become completely debt free. In order to do this effectively, we must first define what we mean by ‘Debt Elimination Techniques’.
According to the Collins English Dictionary (3rd Edition, 1991), the word ‘technique’ means, “A practical method, skill or art applied to a particular task.” This allows us to work from the definition of Debt Elimination Techniques as, “The practical methods and skills required in order to completely eliminate a persons debt.”
I think that now more than ever people are eager to eliminate their debt liabilities. The credit crunch has at least served the useful purpose of waking people up to the dangers of debt and the financial freedom that can be realised by ridding themselves of their debt burden.
Unfortunately, the majority of people simply cannot even begin to eliminate their debts, simply because it can appear to be an insurmountable task. However, by learning and applying three simple debt elimination techniques, you will see that becoming completely debt free is well within your reach – and much sooner than you might expect.
The first thing you must do in order to become debt free is get control of your cash flow. Most people simply cannot account for where their money is going every month, let alone what it is accomplishing for them. If you do not know what is happening to your money every month, you have no hope of controlling your cash flow, and any other debt elimination technique becomes useless.
To control your cash flow you must know it intimately, and the most thorough method for doing this is to simply keep a diary of everything you spend in a typical month – and I mean everything! With every penny accounted for you can now put this information into a simple chart (use an excel spreadsheet to make it easier). Your chart, which we will call your Monthly Statement, should clearly show your total income (after tax), all your individual expenses and your total expenses. You now have the valuable and essential knowledge of what your money is doing every month, and you can now move on to the next technique, and discover just how quickly you can become totally debt free!
Now that you have the foundational knowledge of knowing what your money is doing every month, you can now apply the second technique to get yourself free from debt. It might be worth at this point to encourage ourselves and build ourselves up to the task of eliminating all of our debt. The techniques I am advocating here can appear to be boring, tiresome and hard work, but in reality this is far from the truth. I can tell you from personal experience that as you apply these techniques to your finances you will quickly see how you are creating wealth in your financial life – wealth for you and your family’s enjoyment and benefit. As well as being exciting and rewarding, you will be filled with an ever-increasing confidence in your abilities to manage your finances and become completely debt free.
The second skill you must learn and apply is concerned with controlling your expenses. It is precisely because you have not controlled your expenses in the first place that you find yourself in the problem of being in debt. In order to correct a problem, or mistake, you must go back to the beginning to get yourself on the right path – continuing on the wrong path will simply exasperate the problem. In addressing the problem of debt, going back is the quickest way to advance forwards, and there are no shortcuts.
With your Monthly Statement, work down your expenses column and ask the following questions, “Is this an essential expense (Sky TV for example)? Can I live without this (e.g. your morning Starbucks coffee)? Can I reduce this expense (e.g. by running a cheaper or more economical car)? As you work through your expenses you will be surprised at how much all your little savings can add up to, and rest assured, you will enjoy watching the spare money you have increase.
With this step completed, you can now take your total income figure and subtract your new total expenses figure. This will (hopefully) leave you with a positive amount of spare cash every month. This figure will be your weapon for ridding yourself of all your debts within seven years for most people, so ensure you complete this step with due diligence and move on to the final technique.
We have identified the amount of spare cash you have every month – it is now time to leverage this money in such a manner that it enables you to become debt free (including your mortgage) within seven years!
Create a new chart similar to your Monthly Statement that details all of your debts. The columns you need are: Name of Debt (e.g. MasterCard), Amount Outstanding (the total amount you have left to pay to clear the debt) and Minimum Monthly Payment (make sure this is the minimum amount you are obliged to pay, not what you are currently paying). Organise your list with the debt that has the least amount of money outstanding at the top of the list.
Now, you are going to take all of the spare cash that you identified and add it to the minimum payment on the debt at the top of the list. You then pay this amount off every month, while continuing to make the minimum payments on the other debts in the meantime, until this first debt is paid off completely.
It is essential at this point to note the need for flexibility when using this final technique. Do not think that you are leaving yourself with no spare cash every month should an emergency arise. Far from it – you are actually leveraging the spare cash you do have to eliminate your debts and increase your wealth. If needs be, you can always simply pay the minimum amount on all debts and use the spare cash you have elsewhere if required. It is always your decision, and you should use your own good judgement on where to put your spare cash.
When you have succeeded in paying off the first debt on your list, take the money you were paying off the debt (the minimum payment plus your excess cash), and buy yourself a treat! Yes, congratulate yourself and reward yourself. Enjoy your first significant victory in your fight against debt, for you have just created a little bit more wealth and financial freedom for you and your family.
Now back to work! After rewarding yourself, take the amount you were paying off your first debt (spare cash plus minimum payment) and add it to the minimum payment on the second debt on your list. Continue in this manner, and nine out of ten people will become completely debt free with seven to ten years – then you can really celebrate!
Published At: Isnare.com
Tidak ada komentar:
Posting Komentar