1) Good Debt Exists
Despite what some people will have you believe, some debt is actually good.
Borrowing money to purchase a home, or to complete your education, is generally considered "good" debt; the asset you're gaining - and education is an asset - continues to appreciate in value as the principal balance of your loan decreases. Add into that a generally lower interest rate and a tax deduction on your interest payments, and it's win-win.
2) And Of Course, So Does Bad Debt
Most credit cards carry an interest rate in the mid to high teens, so using it to pay for consumable items like meals or vacations that you couldn't otherwise afford can rack up the debt pretty quickly, and leave you with little to show for it but a sunburn and too-tight pants. If you can't pay for something over the next month or two, you probably can't afford it.
3) Controlling Your Spending Is the First Step to Controlling Debt
Start by tracking your spending for a month using a small notebook to write down every cent you spend. At the end of the month, sit down and see where your money is going, and where you can cut back. If see that you're spending $20 a week on cofee, put that money instead into a savings account, and by the end of the year, you'll be $980 richer.
4) Pay the Debts With The Highest Interest Rate First
Snowballing your debt is an easy way to get control of your debt and quickly eliminate it without going broke. Debts with higher interest rates continue to grow quickly, and by not tackling them first, it will take you longer to pay down your debt.
5) Plan for Emergencies, But Not At the Expense of Reducing Your Debt
Try to figure out how much you can afford to spend each month, and devote a small portion of that to savings, while you put the rest into getting your debt paid down to avoid paying more interest than you have to.
6) Don't Pay that Mortgage Off Yet!
Interest rates on mortgages tend to be lower than on most other types of loans, including student loans, and the interest you pay is tax deductible up to $1 million. Consider putting that money into a mid-term CD instead to maximize your savings.
7) Never, Ever Pay the Minimum!
With the change in banking regulations resulting in an increase in minimum credit card payments, your debt likely won't increase faster than you can pay it down. However, even an extra $10 a month on a $5000 balance at 18% interest can save you $4850 in interest and be paid off 262 months sooner.
8) If You Need Help, Get It
Best Regards,Michael Ivanovwww.gotoloanguru.com
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