60-Second Guide to Getting out of Debt

by Steven on January 5, 2012

I read this article on the Motley Fool blog about how you can get out of debt in 60 seconds. Now you and I both know that you can’t get out of debt in 60 seconds unless you had a lot of money to pay off all of your bills, but the article is more about making a decision to get out of debt. Here’s the article below and I’ll comment afterwards…

Imagine being free of debt — no more sleepless nights over mounting credit card balances, no more ball-and-chain of debt feeding your anxieties, and no chance of threats from dreaded collection agencies. You can do it! Here’s the scoop — in one minute flat.

0:60 Resolve to spend less than you make
Make it a habit as fundamental as stopping for red lights. Realize once and for all that if you can’t pay for it today — you can’t afford it.

0:55 Distinguish between Bad Debt and OK Debt
OK Debt has an interest rate well under 10% — preferably with some tax advantages to boot. In the best case, what you bought with borrowed funds will appreciate in value. Home mortgages and student loans are examples of OK Debt. Automobile loans are on the border: They often satisfy the low-rate piece, but automobiles almost never appreciate in value. Bad Debt is everything else — from your titanium credit card to the 35% loan from Larry’s Kwik Kash.

0:50 Pick a winner…

Its really all about making that decision to first stop getting into more debt and to put together a plan to get yourself out of debt. It might sound simple but its not as easy to apply. Because you’ll have to make the right decision about buying things that you really can’t afford.

Just because you have a credit card with an open balance doesn’t mean you have cash in your pocket. Just because a department store offers you a credit card with a $1,000 credit line doesn’t mean that you have cash in your pocket.

You must understand that regardless if you have good, great or excellent credit if you don’t have lots of cash to pay for the things you want you simply don’t have the money.

Because credit was given out like candy the mindset of all of us was if we had credit we had cash. But that was a set up for a had fall when all the small payments added up.

Here are the 7 Steps to getting your financial house in order…

1. Stabilizing your household situation – you’ll never be able to pay off any debt if you can’t ensure that you and your family has a roof over your head, food on the table, utilities paid and transportation to and from work.

2. Set-up a budget – you’ll never understand how to management your money unless you know to the dollar what’s coming in and what’s going out.

3. Put together a debt elimination plan – when you have a budget you can put together a strategy to pay off your debt faster because you see what’s in front of you.

4. Establish an emergency fund – this is very important because most people use a credit card for an emergency fund and that’s a problem. If you have cash on hand more than likely you’ll rarely have emergencies and if you do have one you won’t have to go into debt to take care of it. I recommend at least $500 to $1,000 accessible cash with no penalties if used. While getting out of debt.

5. Review for acceleration of your debt elimination plan – once you have the other steps on paper there are several options that will open up for settlement offers on credit cards, automobiles, payday loans, etc.

6. Action + Action + Belief + Concentration = Tremendous Results – nothing will happen without you taking definite action with belief you can accomplish your goals and a high level of concentration to keep you focused on your goals.

7. Start saving for life experiences…Fun, Retirement, Generational Wealth

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