Your Guide to Getting Out of Debt
It is no secret that people today are carrying every increasing levels of consumer debt, while not saving enough money for the future. This situation is certainly a risky one, and it is important for all consumers to evaluate their relationship with debt, and to strive to improve their financial situation.
The first step, of course, is to determine if your level of debt is too high. It is often quite difficult to avoid debt altogether, and some forms of debt, like a car loan and home mortgage, are perfectly acceptable for most people. It is important, however to evaluate just how much debt you have, and to take steps to reduce excessive debt.
It is also a good idea to calculate your net worth at least once a year, to make sure you are moving in the right direction. Your net worth is easy to calculate – it is simply the difference between what you own, including all your assets (such as home equity, stocks, retirement plans, investment accounts, etc.) and what you owe on your mortgage, credit cards, and other debt.
Reducing high interest debt, such as credit cards, is of particular important to your financial future. Paying down credit card debt is one of the most effective ways to reduce overall debt levels.
When it comes to credit cards, that means not paying only the minimum balance. Paying only the minimum on your credit cards is a great way to make sure you will be in debt forever. At the minimum payment, it can take decades to pay off even a small credit card balance.
It is important to prioritize your high interest debt according to the interest rate, with the highest interest rate debt getting the top priority. The sooner you are able to eliminate these high interest credit card bills the sooner you will be able to have the money you need to live debt free.