NDSU Extension Service - Ramsey County


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Moving Up & Out of Debt

Moving Up & Out of Debt


          Debt Elimination or debt reduction is at the forefront of many minds these days. Americans are falling further and further behind in their debt elimination.  According to Forbes Magazine, the median household income is a moderate $43,333 --the national average is $50,233- -average credit card debt in each home is $9,797.38.

          Uncertainties about the current economy and the often dismal long-term job outlook, increasing cost of gas and commodities raises the fear of everyone who owns a home, would like to own a home or would like very much to have a job.

          There are a variety of debt elimination strategies you can begin to implement today:

          - Take stock of all your liabilities, so you know exactly how much you owe and to whom.  Put them into a spreadsheet, with monthly payments, interest amounts, balances, and a running grand total of all your balances. Update it monthly as you pay off debt, and watch the overall amount go down slowly which can improve your overall self-motivation in getting out of debt.

          - Have only one credit card with a low limit, and only one loan with monthly payment not exceeding 25% of your income.

          -  Look for expenses coming up in the future and plan for them, so you don't have to go into debt when they come up.

          -  Snowball the debt - Pay minimums on everything, either attack the smallest balance with all the extra cash you can assemble to enjoy the goal of paying off at least one debt or pay off the debt with the highest rate of interest to save dollars on interest. Then move on to the next debt.

          -  Have a common goal with your spouse or partner. Competing goals are a plan to fail.

          - Keep trying and don't ever give up. Make a commitment, and if you aren't getting out of debt slowly but surely, revisit that commitment in your debt elimination plan.

          - Praise yourself for every small accomplishment.

          - Create a realistic debt elimination budget. Put as much money as you can towards paying down debt and having an emergency fund. Only the truly dedicated can live with no social/recreational activities for the amount of time it takes to become debt-free.



          - Be patient. Debt elimination is a long, slow process. Depending on the method you use including a debt settlement program.

          Got a raise coming up? Bookmark it. Pretend it didn't even happen, and funnel all of the new money into your debt elimination plan.

           Change how you think of money. Calculate how much money you make (net) per hour. Do this regardless of whether you are a business owner, salaried or hourly employee. Now apply the time factor to any purchase you make. For example, is that 72 inch flat screen television you're thinking of purchasing worth 10, 20 or 30 hours of your time? Once the dollar amount was removed from the equation and the time factor applied, spending habits can change overnight.


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