By Jayme Hanson
Special to NurseZone
Debt is the result of poor money-management skills or inappropriate spending. Add to that mix a job layoff or other unforeseen external factors and you have a recipe for disaster. You can use the following tips on getting out of debt to get back on track.
Create and stay within a realistic monthly budget. Make a list of all your monthly bills and necessities. You will only be able to spend the money that is left over after all the bills have been paid on nonessential items. Cutting down on your discretionary expenses such as dining out, exceeding your allotted minutes on your cell phone are additional tips on getting out of debt.
Pay off your credit card debt. You’ll want to pay off the credit card that has the highest interest rate, unless one of your cards exceeds 50 percent of your credit limit. You want to pay the credit card balances to below 50 percent of the card limit because having a balance above the 50 percent level will lower your credit score. After you have paid off the balance on the credit card with the highest debt, then pay off the credit card balance with the next highest interest rate and continue until you reach the credit card with the lowest interest rate. One of the best tips on getting out of debt is to have no more than four open accounts to establish a positive credit history.
Use cash instead of credit cards. Keep only one or two primary credit cards and use them only for emergencies, such as the furnace in your home needs to be replaced.
Use direct deposit for your paychecks. By using direct deposit for your paychecks you receive your paycheck without actually going to the bank. This will cut down on the temptation of spending since you won’t be receiving cash each pay period.
Evaluate your housing expenses. Your overall housing expenses should not exceed 33 percent of your household income, including mortgage payments, property tax and homeowner’s insurance. When looking for tips on getting out of debt relook at the amount you are paying for homeowner’s insurance, can you find a lower insurance rate or maybe refinance your mortgage at a lower interest rate. Or maybe you can cut your overall energy cuts.
Avoid using high-interest loans to consolidate debt. If you consolidate all your debt into a high interest loan then you stand a chance of losing everything if you default on that loan. Consider borrowing from either family or friends where you can negotiate a very low interest rate.
Get in touch with your creditors and try to work out a repayment plan. With the economy the way it is today, many creditors are willing to work out repayment plans that will help you make the payments and also help them from having to hire a debt collector.
Become a knowledgeable shopper. Every time you go shopping look for a bargain, deal or savings. You would be surprised at how much money you can save by taking the time to shop around. And always ask the store manager if that is the best they can do on the price. Many times the store manager will give you a discount on the item you wish to purchase if you ask.
Look at different ways to make some money. You could get a part-time job, hold a yard sale or maybe take in a boarder to generate additional income.
The best tip on getting out of debt is to have a plan on how much of your income is going to pay your expenses. If you decide that you need a debt-reduction specialist to give you tips on getting out of debt, make sure you check out the service in advance. Some of these companies are taking advantage of people in debt and charging them extremely high service charges.
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