Category Archives: Get Out of Debt Course
We have been going through the process of getting our finances in order so that we can get out of debt or be well on our way to being debt free in 2011. Your credit goes hand-in-hand with your debt, so we would be remiss if we forgot to pause at this point and see what’s going on with our credit profiles.
Your credit score can have a huge impact on your debt, because it ultimately determines the cost of borrowing money and your interest rates on your credit cards. The lower your score, the higher your interest rate, the more it will take to pay off your debts. But if your credit report has inaccuracies, your credit score can be negatively affected. This week we learn how to fix your credit report. It’s not rocket science, but to those of you who have never taken the time to look at your credit report, this will be helpful.
At this point in our Get Out Of Debt in 2012 process, you should be have made some changes in your spending, saving and bill payment habits. If you just continued doing what you’ve learned from here onward, you will eventually pay off your bills and get to a debt free life. But there’s no reason why we can’t be smarter in how we are paying our bills. It’s time to work smarter, not harder.
Until now, if you’re using the jar or envelope method, you’ve stashed cash into a jar or envelope for each bill category. I haven’t told you how much to put into each category. This week were going to learn about two different bill payment strategies that can maximize the effectiveness of your payments.
The Snowball Method
By now you’ve seen how much debt you owe and devised some sort of a budget. Is that working well for you?
If you’ve followed the jar method of budgeting, you should have had about two weeks of testing this method out. How’s it going? You should be able to project out and see if you will be able to stay within your spending limit for each category – if there are no emergencies.
I’ve found that the “miscellaneous” or “entertainment” jar is where money often disappears the fastest, leaving the savings jar empty or with a few pennies rattling around at the end of the month. Is that what you’ve experienced? If so, it’s fine. We are going to change that for you with today’s lesson. We are not going to restructure your entire debt, we’re just shaking things up a bit.
Last week was the introduction to my Get Out of Debt in 2012 course. We all resolved, together, to get on the path to debt freedom this year. I’m happy to report that many of you are already reducing your debt nicely. Some people are down to $400, some to $20,000 and some just have the lone house payment left. That’s awesome! But we had homework, and like any good lesson, it’s time to hand that homework in.
Your homework last week was to gather together all of your debts and write it down. As I mentioned, it can be hard to get a real perspective when you think of your debt in its parts and not as the sum total. We’ll actually end up breaking apart the debt in the future, but for now, you need to see the entire total together. It’s like gathering up all of cousins during the holidays.
It is now almost the end of January. If you have not already abandoned your New Year’s resolutions, this is a great time to solidify a resolution that is probably already on your list – getting out of debt. Or at least, it’s prime time to begin formalizing a plan to get out of debt in 2012.
I know that you probably go to work and pay your bills religiously, but you might feel as if you’re going nowhere. I did the same thing for years. I woke up every morning with the ominous shadow of a huge debt and the threat of being sued by the landlord of the commercial property where my business had been located, for future rent. Anxiety and TUMS ruled my life, but still, I paid my bills on time.