Imagine it, you being debt-free. No more annoying calls from the credit card companies, "reminding" you that your bill is past due (as if you’d forgotten) and no more giving your entire paycheck over to debt that you accumulated last semester.
Does it seem like a dream? It doesn’t have to be. You can make it your reality! Here’s how to do it – in just about a minute.
0:60 It’s simple – spend less than you make
OK, I know it’s simple, even if it’s not always so easy to do. But following this rule could have a serious impact on your financial health and peace of mind. The truth is if you can’t pay for it today then you probably won’t be able to afford it tomorrow either. So don’t put any unnecessary pressure on yourself to come up with money in the future that you can’t guarantee you’ll have today.
0:50 Bad Debt vs. "Good" Debt – know the difference
Good debt generally has an interest rate of 10% or less and will appreciate in value. Home mortgages and student loans are examples of money borrowed that will be well worth the investment in the future. Car loans are somewhat on the fence, true, they meet the low-rate rule, but cars almost never go up in value. Bad Debt (also known as consumer debt) is everything else – yup, that even includes your platinum-all-star-VIP-rewards card that you’re paying 29% interest on.
0:40 Pick a card & stick with it
I know that "settling" down is probably far from your mind with all the dating choices that you have, but when it comes to credit you’re better off going "steady" with just one major credit card. Choose one with the lowest annual interest rate possible (check out your options at www.choosecreditwisely.com) Cancel and cut up any other cards, including all department store cards – you can even use the little pieces of plastic to make some cool wall art. Now that you’re exclusive to just one card, treat it with respect and you’ll have a great and long-term relationship.
0:30 It’s time to face the music
This won’t be fun at first, but it’s necessary to get you closer to not being afraid that "someone is after you" every time the phone rings. You’ve gotta pay to play, so pull out all of your credit card bills and line ‘em up on the floor. Find the minimum monthly payment for each one and then total them all up to get an overall monthly minimum payment amount. Make a commitment to pay the total minimum due PLUS $100 more to the highest outstanding balance every month (or at least enough to make a dent in it) If you can’t pull this off right away, then come up with a plan that will make it possible within the next three months. It might not be fun, but it’ll be worth it.
0:20 Ready. Set. Attack.
Get angry, I mean fighting mad. Your future is on the line and it’ll be a bright one as long as you’re not strapped with debt. So the next step is to identify which of your credit cards has the highest annual interest rate and apply the $100 more (above the minimum amount due) to the highest interest rate account(s) first. Repeat this process monthly until the last Bad Debt account is paid in full.
0:10 Pretty pleeze?!
Grab a bill from any creditor that’s charging you more than 15% interest. Call them up and with all the Academy Award winning acting skills you can muster ask that your rate lowered to 11%. Tell them that you’d really like to keep your account open with them, but that you’ve gotten "offers" for much-much-lower-rate cards (at this point let your voice trail off for dramatic effect).They’re gonna try to break you, but don’t let ‘em see you sweat, because to them, you’re not just a customer you’re a cash register (they hear cha-ching every time you charge something and don’t pay your balance in full). What do you have to loose? Just try it. It’ll be fun and you stand to save a bunch of money.
0:01 Go ahead…Get your dance on
When the Bad Debt is 100% exorcised go ahead celebrate – heck, when you’re halfway there start doing the "happy dance" – life is meant to be enjoyed and you’ll feel more carefree today when you’ve paid off your bar tab from spring break two years ago. Now that’s something to cheer about!
Sanyika Calloway Boyce is the author of four books. She travels nationwide to educate, empower, entertain and enlighten students about money, credit and debt. This former debt-strapped college student shares real and relevant money messages that young adults can relate to and understand. Visit her online today at www.financialfitnesscoach.com.
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