Avoiding Debt Basics

Avoid Debt
Spending less money than you make is essential to your financial security. Avoid debt, with the exception of buying a modest home or paying for education or other vital needs. If you are in debt, pay it off as quickly as possible. Some useful tools in becoming debt free are a debt-elimination calendar and a family budget worksheet.

Distinguish between Needs and Wants
We must learn to distinguish between wants and needs. We should be modest in our wants. It takes self-discipline to avoid the “buy now, pay later” philosophy and to adopt the “save now and buy later” practice.

Getting and Staying out of Debt
We should avoid debt. There is nothing that will cause greater tensions in life than grinding debt, which will make the debtor a slave to creditors. A specific goal, careful planning, and determined self-discipline are required to accomplish this.

Source: http://www.providentliving.org/content/display/0,11666,7417-1-4006-1,00.html

Steps to Get out of Debt

Are you drowning in the anxiety that accompanies debt? Reclaiming your financial future starts by taking positive steps to get out of debt. Even if you have serious problems with debt, there is hope. Consider taking at least some of the steps below:

 

• Don't wait to act. Just as investments compound over time, so do debts.
• Create a get-out-of-debt plan. Although each creditor has to receive payment every month, put any extra cash toward the debt with the highest interest rate.
• Cut expenses. Try to find a few things that you could stop buying or buy less often.
• Sell rarely used items. Sell these items yourself. Avoid going to a pawnshop.
• Honestly assess your ability and then take the appropriate action. If you bought a car and are having trouble making the payments, for example, it may be better to sell the car and pay off the loan than to let the creditor repossess the car. A repossession will hurt your credit record.
• Try to increase income. Is it possible to get a second job or get paid overtime and use the money to reduce debt? )If you have family responsibilities, first consider what effect your absence will have on the well-being of your family. It's important to balance the need to get out of debt with the need to spend time with your family.)
• When one debt is paid off, keep making the same payment--just put it toward another remaining debt.
• Consolidate loans. Shift higher interest loans to a single lower-rate loan and stop running up new charges.
• Keep only one or two major credit cards. Cut up the other credit cards and call the credit card companies to cancel the accounts. Keep the remaining one or two credit cards at home (as long as the card won't be used by anyone else.) Consider having the credit limit lowered.
• To stop most credit card offers from arriving in your mail, call (888) 5OPT-OUT.

Source: Your Spending Your Savings Your Future: A Beginner's Guide to Financial Readiness, National Endowment for Financial Education, pp. 26-27.