This an article contains proven steps and strategies on how to overcome debt and build sustainable wealth for life.
Leverage, a tool which is often misused in today’s complex world of personal finance. A noun and verb that should have a disclaimer after its definition in the dictionary that reads, “a tool is only as good as its user”.
With the abundance of easy access to leverage (credit) today, it’s easy to see how far down the rabbit hole of debt can go. It can go as far down as you let it. Or, until you become extremely popular with a particular group of people who make threatening phone calls for a living. Or, how about a visit from a large burly man who drives a truck with an arm and hook on the back?
The rabbit hole of debt only gets narrower as you go down it. The scary thing is that most don’t know they are travelling down this hole until it’s too late. If this is starting to sound familiar, don’t feel alone because it’s more common than you realize.
Using financial leverage has become the norm really. It’s been the status-quo for the last several decades now. Student loans, car loans, mortgages and the most available and widely used of all, credit cards to name the most common. Consumerism has made credit so available, why would anybody pay for what they want now?
Good question. A question that leads to a topic that was never discussed or taught in the public school system. Nope, never saw it on the curriculum. Hindsight is always twenty-twenty, as they say. Good news is that there’s a way out.
If you’re starting to drown in your ocean of bills, you’ll learn how to breathe again and pull yourself out of the ocean of debt. Don’t keep treading the waters of this endless cycle anymore. This text will teach you what they failed to teach in school. It will help to fill in the knowledge gap that so many do not even realize they are missing.
Learn the steps on how to get out of debt FAST and build wealth for life. You’ll learn everything from framing your mind with the proper mindset, to proven effective steps to immediately improve your personal finances and, building sustainable wealth and success for life.
1. The Debt Free Mindset
Being debt-free does not mean not having debts. It simply means changing your mindset about your debts and using the latter wisely to obtain the things you need and want. Learn how you can acquire a debt-free mindset and have a better financial edge over someone who doesn’t.
Phase One: Changing Your Debt Outlook
Accept the fact that changing your mindset can take awhile. This is the first step to having the mindset of being debt-free. Changing the way you view and treat debts is something that can take more than one day to happen. However, once the change does take place, you will find yourself progressing faster than you can imagine.
Stop treating debt as a way to buy things. Like most people, you may be likely to view the practice of taking on debt as a normal activity. However, you have to stop thinking of loan applications and credit payments as a regular method of getting the things you want.
Accept debt for what it truly is. There are so many ways to refer to your debts by other names (loan, mortgage, or credit) and to treat them as everyday transactions, but a debt is still something you owe and have to pay back.
You will know that you have already acquired a complete debt-free mindset once you realize that borrowing money from a person or an institution, and not being able to pay back, means living a life of bondage.
Phase Two: Harnessing the Power of Credit
Once you have changed your mindset, you can apply the following tips on using your debts to your advantage.
Make use of debts to build good credit. Taking on debt is actually a good way of improving your credit standing, as long as you make sure to pay off the debt on time. Don’t wait for the interest attached to it to pile up; take steps to pay back your debt as soon as you can.
Take advantage of several debt benefits. You also have to realize that debt is actually a fast way for you buy the things you need. You won’t be affected when buying in business establishments that do not accept personal checks since you can simply use a credit card, which is accepted anywhere.
Taking on debt is also a way of letting you afford expensive necessities, such as a house. The important thing to remember is to pay off the monthly payments on schedule.
Keep interest-generating money safe. Using your credit card to buy things prevents you from dipping into your savings or investment account, where your funds can consistently earn interest. Again, just make sure to pay your credit card bills on time to avoid having the interest build up.
2. The Credit Purge
Having to pay for penalties or accumulated interests will be a thing of the past once you decide to use cash in your financial transactions. You don’t necessarily need to use a credit card every time you make a purchase, and going cash only makes it easier for you to avoid taking on debts.
Here are the reasons you should start going cash from now on.
You end up spending mindfully. It is possible to live solely on cash and not end up feeling deprived about it. In fact, you can’t help but feel satisfied that your decision to go cash lets you spend below your usual expenditure amount. You also enjoy the double benefit of becoming more aware of your spending habits and making more mindful spending choices.
You are able to stick to your budget. Opting to use cash encourages you to learn to live within your means. You train yourself to spend less on your purchases, and you buy only the things you absolutely need. You also reduce your temptation to buy items you can’t afford in the first place, which is allowed if you use credit.
However, there are certain drawbacks to relying on cash alone.
Cash cannot protect you from problematic transactions. Cash cannot be treated as a cure-all method of payment. Using cash does not protect you from certain store policies the way using a credit card does, such as limited warranties or no-return policies. When going cash, it helps to be aware of a store’s policies before making purchases.
Cash limits your range of financial transactions. Certain transactions may not push through if you use cash, including renting a car, going on a vacation, or making a hotel room reservation. And you can’t carry large amounts of cash with you in these situations, as it could get stolen or lost.
Fortunately, there are alternative solutions you can count on.
Use a debit card. Because it is not advisable to carry cash in large amounts, using a debit card may be necessary. A debit card offers you the power to transact while protecting your cash.
Use a credit card and one card only. A credit card is still an efficient mode of payment you can turn to in case of legitimate emergencies. If you do decide to use one, keep up with the monthly payments and always pay them in full.
SEE ALSO: How To Control Spending Habits: 10 Best Tips to Curb Your Overspending
3. Assessing Your Resources
Paying off your debts sooner is possible with the help of additional resources, such as looking for a second job, earning from unconventional methods, and selling some of your items.
Find Another Job
This is one of the fastest ways you can pay off your debts sooner than you might expect. Getting a second job lets you increase your income if working overtime on your current job is not an option.
Work during the holidays.The holiday season is a great opportunity for you to look for odd jobs that provide you a regular income for a couple of months, even if you don ’ t have any previous experience.
A number of retail shop owners need all the help they could get during the holidays for different tasks, including tending the cash register, manning the customer service area, and restocking the shelves.
Celebrate your unique talents. You can put your unique skills to good use by posting them on websites, where you can easily make five dollars in a couple of minutes. You get to earn money while sharing your skills in graphics, marketing, advertising, writing, and programming, among others.
Consider becoming a virtual assistant. Virtual assistance is fast becoming a necessity in online businesses. If you opt to become a virtual assistant, you will be tasked to perform a number of clerical or administrative duties, get paid by the hour or per project, and have the advantage of working at home.
Look for Alternative Money-Making Strategies
You can also count on a number of non-traditional ways of earning an additional income, which include the following:
Redeem your credit card rewards. Consider redeeming the cash back and travel rewards offered by your credit card company. Just make sure to regularly pay off your monthly balance on time and in full to avoid taking on new debt.
Allow other people to use your hair. You can sell your hair to professional salons or online markets. Many people are willing to buy untreated human hair that is at least ten inches in length. Your hair strands will then be used to make hair extensions, weaves, and doll accessories.
Decide on What to Sell
Part ways with some valuable items you have lying around your house. You get to free up some needed space, and you also get to earn extra cash from them.
Hold a garage sale. Get your house decluttered and make a couple of hundred dollars in the process by holding a garage sale. Create a display table where you can show your items prominently. Make sure each item is marked with its appropriate price. This helps your customers sort through your goods easily and ensures your garage sale’s success.
Sell your more valuable stuff online. If you have more expensive items to sell, you could try putting them up on free websites. You can benefit from the absence of fees, which allows you to keep all your sales to yourself. Be prepared to lower your price, though, as your customers are likely to negotiate on the amount you are asking for.
When considering the idea of consolidating your debts to benefit from the lower interest rates it can offer, it helps to first seek a credit counselor who can give you advice on three essential things:
Learning how to manage your debts. The most common reason for getting into debt is not being able to afford making the monthly payments after taking the daily living expenses into account. Talking to your credit counselor (1) on this matter can help you figure out the most appropriate manner to handle your debts.
Learning how to negotiate your debt payments. You can also seek advice from your credit counselor on the best way to approach your individual creditors, with whom you will discuss the possibility of lowering the amount of your monthly payments.
There are creditors who are willing to negotiate on your terms on this aspect, since this ensures that they will get paid regularly. You can appeal to them to either lower the amount or change the monthly due date.
Arming yourself with information on loan consolidation. Before deciding to have your debts consolidated, it helps to learn about several important points first regarding different consolidation options.
Debt Consolidation Loan
The debt consolidation loan gathers all of your debts and makes it possible for you to pay them off through a single loan payment. This type of loan is offered by a great number of lending institutions, credit unions, and banks.
Advantage. The debt consolidation loan lets you benefit from the ease with which you can pay a number of different creditors. You can also take advantage of the interest rates they offer, which may be lower than your current one.
Disadvantage. Bear in mind that although you may enjoy lower monthly payments and interest after consolidating your debts, taking on additional loans or credit can set you back farther in debt.
Helpful Tip. It helps to know the total of all your current monthly payments first, including interest and fees, before taking out a debt consolidation loan. You will know whether going ahead works for you after comparing what you are currently paying with the amount you will have to pay when taking out the consolidation loan.
Debt Consolidation on a Single Account
You are allowed by many credit card companies to avail of a balance transfer at a zero-percent or low-interest rate, in order to gather all your debts in one account.
Advantage. What is great about this scheme is that you benefit making only one payment as well as possibly enjoy paying lower amounts.
Disadvantage. You will have to check, however, if there are hidden costs involved; they can cause the amount of your monthly payment to be increased. Find out if you have to pay for a balance transfer fee upon application, or if you will be charged additional interest when making purchases with your card.
Helpful Tip. Know the exact date wherein the zero- or low-interest rate applied to your balance transfer ends. After a balance transfer is made, opt to use a separate card for purchasing items to help you avoid incurring interest.
SEE ALSO: Use These The Best 11 Ideas For Saving Money To Extend Your Budget
5. Liquidation and Repayment
Liquidating Your Assets
Selling off your assets is an effective way of generating the funds you need to pay off debts. There are a number of things you have to understand about liquidation, though, and the tips below are a good way to start.
Make a thorough assessment of your assets.
Start your assessment by drawing up a list of inventory of all your assets. It would be helpful to have a photographs of the items included in the inventory, as well as their serial numbers, description of their current condition, date of purchase, and other important details for reference.
All of the information you collect for each item will help you save time and money during and after the liquidation process, when the IRS or your creditors might ask for details of the sale.
Then organize your goods for the sale. To increase the overall marketability of the items, avoid including any worn-out furniture, equipment, or fixture in the sale, and donate them instead. You can benefit from receiving a tax break for doing so.
Know your assets ’ liquidation values. You can calculate the liquidation value of each of your assets by estimating the amount you can possibly make in an instance of a forced sale.
Generally, any item ’ s liquidation value is equivalent to about eighty percent of its retail value. A professional appraiser should be able to help you in this aspect, and it pays to study his appraisal report before considering any buying offer.
Deduct the cost of making a sale. Ensure the soundness of your decision to sell. It helps to get a clear estimate of your net value proceeds the moment you obtain your assets ’ appraisal value. Make sure to exclude any cost incurred in the sale, including labor and advertising expenses, commissions and credit card discounts, utilities and rent, and moving and storage costs.
Select the type of sale that is best for your goods. Once you have figured out that making a liquidation sale is a sensible idea, you can move on to selecting the type of sale that is most appropriate for your goods.
One of the more popular and lucrative avenues you can use to sell your assets is through the Internet; just make sure to familiarize yourself with the policies and legal matters involved in becoming an online seller.
If you happen to have gadgets, clothing, shoes, appliances, and other smaller items you want to dispose of, you could try selling them in going-out-of-business or retail sales.
If your assets can be transported without difficulty and time is not a matter of great concern, then you might try selling off your goods in a consignment sale, especially if you have a local dealer in your area that specializes in the same items you are going to sell.
Learn the best time and location to sell your goods. It pays to choose the best season (it should be appropriate for the nature of the items you are planning to sell), day and time (these should be convenient for your potential buyers) to make your sale.
To enable you to have a successful sale, make sure to select the best location for you to hold it. Generally, a seller ’ s own premises is the most appropriate place to hold a sale, since items on sale tend to look most attractive in the setting where they are usually put to use.
Get expert help. It will be beneficial for you to hold your sale with the help of an expert (broker, dealer, or auctioneer), who can oversee things to make sure that your sale yields the highest earnings it can possibly generate.
Go for a non-recourse bill of sale. The experts you hired should be the ones to manage the paperwork involved in your sale, but it still helps to make sure that your items were sold on an “ as is, where is ” basis. A sale without recourse helps protect you from potential disputes, since you are not
obliged to honor requests or demands for a refund or a replacement of an item.
Creating Your Repayment Plan
Drawing up a repayment plan benefits you in three ways: you are allowed to have a tangible way of closely examining your debt problem; you are shown the most effective manner in which you can pay off each of your debts; and you can use the same plan to ask for assistance with your debt situation.
Steps to creating your repayment plan:
Examine Your Monthly Cash Flow. Get the sum of all of your bills for the month. Include everything – from food, utilities, and gas, to credit card bills, mortgage amortization, and loan statements. Even your bi-annual or quarterly payments for insurance should be included as well. The total amount you get will then be deducted from your gross monthly income.
Determine your recovery figure. The number you obtain after deducting all your liabilities from your assets will be the amount that will enable you to recover from debt, and this should be the same amount you will be targeting in your liquidation plan. It is important to ensure that the said amount is one that is reasonable; you will then apply it to your monthly debt obligations.
Get Your Debts in Order
Disregarding their interest rates, order your debts in terms of amount. It helps to do this by listing them from smallest to highest, since the former are the easiest to pay off. That quick victory helps encourage you to gradually pay off each debt in your list.
This method places more importance on motivation as well as seeing your progress on paper, than on interest savings and speed. If what you would prefer is the other way around, wherein you will pay a lower amount in interest, make sure to order your debts from highest to lowest.
You will then apply your recovery figure to the first debt listed, along with its minimum balance. As for your other debts, you have to keep paying off their minimum balance as well.
Move through Your List of Debts.
You will find that you have extra money after you have paid off your first debt. Use this amount to pay off the next debt on your list. Apply the same method you did with the first debt. After the second debt is paid off, do the same to the third one as well as the rest, until all of your debts have been successfully paid off.
6. Building Sustainable Wealth for Life
Even if you still have existing debts, there is no reason for you to drastically decide that there is no way you can save money, let alone build sizeable funds. You can still use your credit to your advantage, especially in accomplishing your goal of building sustainable wealth for life.
Utilize Your Credit Card Rewards
This is where having a good credit score (2) pays off: Your bank can make you eligible for credit card rewards if your credit score is good. These rewards can be in the form of cash or perks.
Steps to using your credit card rewards the right way:
1. Resolve to always pay in full. It would also be preferable if you could make each of your credit card payments before their due dates. This makes it easy for you to avoid having to pay interest. It also helps to ask your bank for an automatic payment system. The only thing you have to think about then is ensuring that your checking account has enough funds to pay off your credit card dues.
2. Create a budget. Having a budget to guide you in making purchases helps prevent you from spending above your credit card’s limit. Spend only on items that are included in your budget. And you might consider opting out of taking advantage of your credit card rewards if you know that you do tend to overspend.
3. Avoid using too many credit cards. Those credit card offers can be difficult to pass up, and you might be tempted to take them all at once. But opening too many cards can cause you to lose track and fail to make full payments on time, and this can potentially hurt your credit rating.
4. Look out for hidden fees. Watch out for some credit card programs – they have a number of great offers that would seem ridiculous to pass them up. But you have to be aware that they might oblige you to pay for annual fees. This is why it is important to read all documents connected to credit card offers before accepting them.
Take Advantage of Home and Car Loans
You can follow what some home and car buyers have opted to do when making their purchase. Even if you regard the price offered as affordable, you can choose to pay an amount that is significantly lower. As long as you have a good credit score, this may actually be a viable way for you to get approved when you apply for a loan with low interest rates.
The rates tend to be so low that, rather than putting your money toward making the purchase, you can use it to invest and then earn a return. The premise is that you are actually earning money by taking out a loan.