FNTN

Introduction.

OK, hands up – who made a New Years resolution a few days ago to get themselves out of debt this year? Ah Ha, just as I thought – you did; now then when you made that debt removal resolution did you also make a plan so that you can actually get out of debt, or are you just hoping that somehow your debts will go away? Mmm, I thought so!

Are you drowning in debts?

Getting into debt.

Getting into debt can be the easiest of things and might genuinely have been through no fault of your own. You could have been leading a comfortable but not extravagant life-style, only to have lost your job in the recession; or it might be that you and your partner suddenly find your lives are to be changed for ever with the arrival of a baby that wasn’t quite planned for. The point here is its not just people who spend money unwisely or even wastefully that can find themselves in debt – any one can and for any number of reasons. However, the one inescapable fact is that once you are in debt it won’t miraculously disappear of its own accord. You have to work at clearing your debts and to do that you need a debt removal plan.

Even a great looking magician can't make your debts disappear.

You need a debt removal plan.

No one is going to pretend that getting yourself out of debt won’t be tough, but of the utmost importance is realizing that you can get yourself out of debt – providing you draw up a plan and stick to it. Also, don’t think that you’re on your own with your debts. You will find that if you are honest with the banks and finance houses that you owe money to, that they will do their bit to help you pay off your debts. After all it is in their own best interests to recoup the money that you owe them, even if it takes a little longer than planned, rather than losing out by you completely defaulting on a loan. We’ll go through the sorts of things you should include in your debt removal plan soon, but remember these ideas are just guides to get you thinking about how you get yourself out of debt – you need your own plan to meet your own needs. Which is why you are recommended to seek specialist online financial advice, as to how you should set about clearing your debts.

Use an online budget calculator - not a pen and paper one!

Have a budget.

It never ceases to amaze me how many people, regardless of their income, think that they can go through life without having a weekly or monthly budget plan. The secret with a budget plan is to spend as you would do normally and carefully write down everything you buy and what it was for. Some of your expenditure will be unavoidable, your mortgage payments or rent, utility bills etc, before getting around to living expenses. Having looked at your mortgage or rent, utility bills and your current debt repayment plans - everything else that you spend money on can be reduced. Remember the object is to remove your debts, so you need to accept a little short-term pain in going without unnecessary things for the long term benefit of clearing your debts. A major thing to look at is your food bills, shop around and look for special offers and cheaper brands, cook food yourself rather than opting to eat out or have things like cooked pizzas etc delivered to your home. Look at how much you spend on socializing, you don’t have to live like a monk – but by cutting back on going out you’ll save money in other ways. For example, for a night out going to a movie will be much less expensive than sitting in a bar all night, no need to use that credit card for a new outfit – let alone what you’ll save on drinks! Depending on how your utilities are metered you might be able to save money on those too, turn down the heating a degree or two, insulate that roof space and don’t have the wash-tub on when it’s only half full.

Destroy those expensive credit cards.

Paying down debts.

One immediate way you can both reduce the amount of debt you’re in and start paying down debts is by looking at your credit cards. You’re in debt so the last thing you should be doing is spending money on high interest credit cards. Destroy them all but the one with the lowest interest rate. You still have to pay off the other cards debts, but at least you’re not spending more on them. Also, have a look online at credit card offers to see if you can transfer all of the debts to a new lower interest one, especially if it will offer 0% on new purchases for the next year. Whether your debts are on credit cards or through personal loans, always look to pay off the highest interest debts as a priority, the sooner they’re paid the easier it will become paying off other debts. If one of your debts is for an auto loan ask yourself – do you really need that set of wheels? If you live on your own it may well be that you do need them; however, if you’re with a living with a partner or friends – do you really need more than one car? Apart from the loan think how much you could save on fuel, tax and servicing etc?

Selling up might be hard - but what about a refinance mortgage?

You need to live somewhere.

Of course you need to live somewhere – but if you’re paying rent does it have to be in a $5000 a month apartment? Think about down-sizing or at least get someone in to share the costs with you. If you’re buying or own a property moving might not be quite so straightforward. However, even things like monthly mortgage repayments can be reduced, meaning that you have spare cash to help you to pay down your debts. All you need to do is look online for a re-mortgage finance deal and your monthly repayments could be significantly reduced by either finding a lower interest rate mortgage offer or extending the period of your repayments. Of course if you’ve got equity on your property then you could alternatively seek a home equity mortgage loan.