Five Financial Goals – Getting Out Of Debt

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Getting Out Of Debt, A Critical Financial Goal

Getting out of debt is another key goal to taking control of your finances and your future. By eliminating debt you not only free yourself from current obligations, you also give yourself more options going forward into the future.

Simple Steps For Getting Out Of Debt

The first step to getting out of debt is to clearly determine how much debt you have and what kind of debt it is. There are many kinds of debt ranging from short high cost credit cards or short-term loans from finance companies, through to mortgages or simply money that you have borrowed from friends and family. It is important to list the amount that is owed, the terms of the loan and most importantly the interest rate that you are being charged on the money that you have borrowed.

Once you have all of your debts listed, then it is pretty easy to see which of your debts has either the highest interest rate, or the least flexible terms in view of repayment. (for instance, some mortgages only allow repayment on an annual basis and are restricted as to the amount that can be repaid at any given time). Start with the one with the highest interest rate, especially if it is a credit card. Pay off as much as you possibly can as rapidly as you possibly can. Then continue to make the same payment against the next credit card, as well as your normal payment for that card. Credit cards are great tools of convenience, but are best treated by paying them off in full every month.

getting out of debtOnce you have all your credit cards paid off, then begin to work on any demand loans that you have. These would include student loans,  as well as vehicle loans and anything else bought on time such as electronics or furniture. Many of these have low monthly payments making them seem quite innocent,  when in fact they take almost forever to pay off. It is not uncommon for the life of the loan to outlive the useful life of the item that you obtained the loan for.

The last debt that you should have would be a mortgage,  and I personally would encourage that to be paid off as well, as long as you have enough money set aside for investments. (See the previous post on Budgeting ). If that is not possible, make sure that the mortgage is paid down below 80% LTV (loan to value) so you avoid the ridiculously high (CMHC) fees.

Remember,  that it took more than a day or two to get into debt,  so it is going to take more than a day or two to get out of debt. It is going to require some sacrifice, and some self-discipline, but the rewards of being debt free far outweigh the pain. There is no substitute for the feeling of freedom that being debt free brings.

Tomorrow we are going to look at saving money and ways that make savings fun and interesting.

Till Next Time….

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Sigrid McNab

Skype: sigrid.mcnab

Email: sigridmcnab@gmail.com

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About Sigrid McNab

Sigrid McNab is the author of #1 Amazon Best Seller, speaker and the CEO and Founder of sigridmcnab.com. Sigrid specializes in blogging, attraction marketing, and generating highly qualified leads. Sigrid teaches people how to build a successful online business.

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4 Responses to “Five Financial Goals – Getting Out Of Debt”

  1. Hale Yes Says:

    Boy Sigrid – you obviously enjoy this financial business. It is something that I have always said “I should learn and enjoy that!”, but I never do.

    I saw a demo the other day that was very interesting and right up the alley.
    It talked about borrowing from a loan shark. You borrow $1,000 and agree to pay it off in five months. The loan shark want $1,200 per month. $1,000 in interest and $200 goes to pay of the load. That seems horrid and a super bad deal.

    Then the presenter showed the initial payments on a mortgage. You can pay $1,200 a month and $200 goes to the principle. Hmmm do those number sound familiar?!

    Thanks again -interesting read
    Hale
    Hale Yes recently posted…Dr. Hale’s Take on Internet Marketing Resolutions That WorkMy Profile

    [Reply]

    sigrid Reply:

    Great analogy Hale. Interesting, isn’t it?

    [Reply]

    Reply

  2. Dagmar Wichary Says:

    When I see the high Interest on Credit cards it makes me shiver. I changed to mostly paying cash for Items and use credit cards only in special circumstances.Even then it is hard and I had to give up some things I loved doing.

    [Reply]

    sigrid Reply:

    Good for you for taking steps in the right direction Dagmar..

    [Reply]

    Reply

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