Effective Debt Elimination
Total debt elimination is a formidable challenge, but not impossible. Some people who have reached a point in their lives where they felt that the grip of financial problems was something that they would never like to feel again, have sat down to formulate a plan for total debt elimination. A recently retired businessman who wanted to enjoy his retirement years likened the process of total debt elimination as something similar to a psychological cleansing. He had to face not only daunting payment schemes and stubborn creditors- everything he feared- but his own attitudes about money and spending as well. The entire challenge was cathartic and emotionally satisfying, like eliminating psychological toxins. At the end of the process of debt elimination, not only was he debt free, but possessed of a state of mind that allowed him to enjoy his retirement years to the fullest with the comforting thought that he would never again mismanage the money he had left.
The first step in debt elimination is making a comprehensive list of everything that you owe to include interest charges if any and minimum payment amounts (in the case of credit cards). Make a careful distinction as to which of these debts classifies as either your Top 1 Priority of Top 2 Priority. You would like to prioritize debts like credit debt (because they accumulate interest charges), available mortgage payments, existing alimony or child support payments and delinquent tax arrears. Your second priority may be personal debts owed to family and friends, college loans and existing car payments. Depending really on your age or current financial situation, debt elimination can be total or gradual. People in their advanced years are assumed to receive the greater benefit from total debt elimination. There is less urgency if you are below 40, but being debt free at a young age obviously has greater benefits than anything else. There is more freedom to enjoy life as well as to explore opportunity to earn more money and keep it aside. But a successful debt elimination scheme is also dependent on age because age can determine your ability to pay off certain debts. It is assumed that seniority has within its reach more financial resources to pay debts lump sum as compared to a 30-year old that has to struggle with a career and other family expenses on top of committing to a stringent payment scheme. After making the list and assessing how much one owns, the next step would be assessing how much one actually has in order to put the payments into effect. There are certain tricks to paying some debts; for credit cards, pay the card that charges you with the highest interest rate first and then pay the rest in that order accordingly. Mortgage and tax arrears are non-negotiable- you may have to fork out emergency funds to pay them outright if you want to avoid foreclosure or a lawsuit. Top 2 Priority debts should be paid in good faith as well; the advantages of such debts is that a family member or a friend may be more accommodating than a formal creditor and would probably agree to payments on an installment basis. Remember that in debt elimination, there is no middle ground. The only way for debts to disappear is to pay them off- they will not grow any less if you ignore them or procrastinate in paying them off. |