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Visit our on-line store for related books and products Our Approach to Debt Management to Get Out of Debt The best approach to handling debt is to be debt free, to start with. I know that for most of us, that being debt free is not very practical. Even today we still have some debt. Getting control of your debt will probably be the most challenging and difficult part to attaining your goal. When we started work on attaining our long term goal of being self-sufficient, we worked on balancing our debt with our goal for saving for the future. If you can control your debt you will be way ahead on attaining your goal. The people we know that have had the most problems are the ones that could not control their debt. Remember, the foundation to true wealth is having more assets than debt. Help support our site by viewing (Clicking) at least one ad displayed on this site. Thank you. The Biggest Debt is Your Home Our first house was in a nice (not great) neighborhood. It was affordable with a FHAÂ loan with just a little over the minimum down. The payment (principal, interest & insurance) was equal to one week of my gross pay. We never relied on my partners salary for any loan payments. The house was basic with a good design and allow additions without hurting its appeal. It was a three bedroom, two bath with a two car garage of about 1,400 square feet. The point I am making is, when starting out do not buy more than you need. Let the house appreciate, while building equity that you can use later to buy a bigger home or to use the equity to build onto if you like where you are and want to stay. The tax advantage of using equity in your home is the best type of loans. Being in a hurry to have too much to soon will be your downfall. Proper pacing your need with what you can afford and still be able to save it what is important. One way that works for many people, is to buy a home in a area that is in the process of being revitalized by people moving in and fixing up these older homes. This can have big rewards, especially if you are willing to learn and do a lot of the work yourselves. When looking for a home choose with care, especially the area. There is more than just good schools. Look for an area that will increase in popularity and thus appreciate faster. Our present home of 16 years is on the water in a small beach community that was known for its fishing. We bought a year after a hurricane came very close a caused the highest tides our area had seen in 50 years. This caused many houses to go on the market because they flooded or people were scared that the next time it could be worse. It provided us the ability to purchase our dream home at a very reduced price. It also made it to easy to find out which houses were the highest and the least prone to flooding. And to this day we have yet to have water in the house. While your situation will be different, prepare and plan for what you want and act when it is best for you. That way you are in control and usually you will do very well. Buying Transportation We all like our cars, SUVs and trucks. It is this love that gets many of us into trouble. We too have fallen into this trap of buying on impulse, rather than planning and preparing properly for such an important purchase. To reach our goals we now plan for cars very carefully. We no longer buy new. We buy makes and types of cars that have a proven track record for retaining their value. We research Consumer Reports and other resources for those that have the best maintenance record. We plan our purchase to meet our budget and we stagger our vehicle purchases so that we only have one payment at a time. We also have rotated cars so that which ever one of us drives the farthest gets the better car. When purchasing new or used, try and go through a purchasing service with you bank or credit union. We prefer credit unions over banks as many are member owned and have your best interest in mind. These services can offer assistance and almost eliminate the heavy handed sales pitch at the dealer. Most credit unions or banks will pre-approve you so you can deal for a cash purchase. If you need to have a vehicle that is fairly new look into buying one that is coming off lease. These are usually lower mileage and are better maintained. We also sell our current car rather than getting wholesale or below on trade. We also stay clear of all extended maintenance agreements, as these never seem to pay for themselves. Our rational is if we have bought with careful planning and do our homework we will not have many problems. Credit Cards Credit card debt is the demise of many who thought that they could have today and pay off tomorrow. Please, if you do use anything else we have talked about, at least control and if you can eliminate your credit card spending. I assure you that you will be better off in the long term. If you can cut your cards up and use debit cards instead. Debit cards usually deduct directly from your savings or checking account and work the same credit. If you get or already have one, stay away from those ATMs. If you plan an budget your spending properly you will never need an ATM. Reducing / Consolidate Your Debt What to do when you are already over your head in debt. In most case bankruptcy is not the answer. This will only just hurt you later on. If you are really desparate and need some releif, talk to each place you owe money and tell make arrangement to get the debt reduced. Many places will, if approached properly try to help. One of the best ways that I have heard to tackle a huge debt burden is called Reducing the "Debt Snowball". The financial counselor and writer Dave Ramsey has written several good books on the subject. (See references below). I highly recommend them if you need help in this area. He also holds seminars and has a daily radio show where he gives advice on getting out of debt. While we don't aggree with everything he talks about, we do believe in the principle and methods. Remember to take care of the basics first; house, food, clothing and utilities. In simple terms to reduce your other debt you will pay off the debt from smallest to largest: List all of your debts smallest to largest. - Take as much money as you can and put it all towards the smallest first until it is paid off.
- Take the money that you were paying on the first debt and add it to the next largest payment.
- Keep this cycle up until you have your debt under control or paid off.
Take the money you were using to pay off your debt and put it into savings before you get use to it and spending it on things not in your plan. Another way is to roll some of your biggest debt like a car into an home equity loan. Just remember your home is your equity is not you be used as a piggy bank to rob any time you have a whime to buy something now rather than planning and saving for it. References:
Below are items and tools regarding debt reduction. We state throughout the site that you should not rely on any one information source when it comes to your financial health. Please use these tools and references as they can give you another perspective and more detailed information. To assist you we have included links to amazon.com so that can purchase the books we believe can provide you that perspective.
Just click on the image, link or button.
Books:  Financial Peace Revisited By Dave Ramsey
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Websites:
The following links are provided to provide different perspectives and additional information only. This is not intended as a reccomendation or that we aggree with all the views and content on these sites. Dave Ramsey's web site. http://www.daveramsey.com A law site that has a great deal of information regarding budgeting and debt reduction. http://www.mdbankruptcylaw.com
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