By Angel Feimster-Montoya
Most Americans are serving time in a place known as “Debtor’s Prison.” We are furiously trying to get out of debt and free ourselves from this financial nightmare. We owe credit card companies, banks, mortgage companies and the list goes on. It’s so easy getting into debt and getting out can seem impossible. Most of us tend to live beyond our means and make unnecessary purchases with credit cards, or sadly we lose our income due to lay-offs and can no longer keep up with mounting bills.
Understanding types of debt is important. Some debt is necessary. This includes mortgages and student loans. Make sure to write them off on your taxes if applicable and this will increase your refund. Unnecessary debt includes credits cards. We all know the trouble they can bring when used irresponsibly.
If you have numerous credit cards, cut them up immediately! Keep one for emergencies only, but make sure it has a low annual interest rate. Make your payments on time and pay more than the minimum payment. Good ones have are, American Express, MasterCard, or Visa, since they can be used almost everywhere. Stay away from department store credit cards. The interest rates are too high. If you do not have a low interest rate, then ask for one. Credit card companies will work with you if you have paid on time.
If not, continue to make payments and after several months call and ask again about a lower interest rate. Be firm and let them you know you are trying to remain in good standing and they will work with you. Also make sure to tell them if you are having financial problems. Most credit card companies will make note of it and will come up with additional payment options.
Some people like to use balance transfers as a way of getting a lower interest rate. Transferring your debt to a new low interest card can be very tricky though. It’s easy to end up with more debt than you started with and the previously lower interest rates can skyrocket at any time.
Next settle you bad debt accounts if you have them. Total the minimum payments on each account and make sure you pay this entire amount every month plus some. This may require extra income by taking on a part time job, or by reducing your monthly expenses.
Beginning the journey towards financial freedom and wealth means that you have to purposefully sacrifice unnecessary purchases. Create a budget. Remember when shopping if you do not have the cash then you can’t afford it. Spend less and save more. Shopping and going out to dinner with friends may have to take a back seat for a while. This is hard but it is a must if you want to get out of debt and begin to save money.
Plan to save by putting money away whenever you can into a high yield savings account. These can be opened easily online and some do not even require a minimum balance. Put away whatever amount you can afford even if it’s only five dollars. It’s something and its’ a start!
