How do I get out of debt? This is a question that’s followed by confusion often. Then the next statement usually is:
“I want to get out of debt quickly. I’ll focus on this when I have the money.”
This statement has been echoed by many people over the years and has only been true in cases where the person won the lottery.
Chances are that if it took you so many years to accumulate all of that debt, it won’t go away over night, it will just as much, if not more time to completely erase the debt. There are many debt solutions for those that are looking to get out of debt. You can consolidate your debt to make it easier to pay off. You can use windfalls to pay off your debt.
Before you pay off any debt you must be able to rank your debt.
How do you compare debt to pay off?
Losing your debt is exactly like losing weight, you spent so many years eating improper food, gaining tons of weight, and then you expect to lose it within a couple of days. Then when you realize the weight won’t go away immediately, you give up just like you would with paying off your debt. The truth of the matter is, you can’t crash diet and you definitely can’t crash budget.
Are you ready to get out of debt?
This article is not designed to tell you why you should pay your debt off or to try to motivate you. The whole purpose is to help you rank your debt so you know where to begin. Before you begin paying off your debt, you must sit down and realistically rank your debt. Obviously ranking your debt sounds too ambiguous, so below I have a very simple ranking method:
- Bad debt-Credit card
- Bad debt- Automobile
- Decent debt
- Good debt- Student Loan
- Good debt- Mortgage
Getting out of debt right now
This list is just a rough guideline for ranking your debt, obviously there are different forms of debt that are not covered in the list but you can use common sense to rank them on the scale of 1-5. The reason credit card debt is considered the worst form of the debt is because it usually has the highest interest rate and because it tends to be non-essential purchases. Mortgages and student loans are good forms of debt (traditionally) because they are both purchases that will arguably improve your quality of life and usually have lower interest rates.
How do I get out of debt quickly?
Once you have ranked your debt you must begin paying it off from the top. Every time you pay off a debt you remove it from your list and work your way down the list.
Paying off debt sounds easier than it sounds that is why you should have a clear plan outlined, directly related to your current salary. Usually the best way to make payments is by doing automatic deductions from your pay check, so that you yourself don’t actually have to make any transactions. By not even seeing the money, you’ll have no opportunity to spend the money, putting you on the right path. Remember this process will be very long, but as soon as your debt is paid off you may begin saving and planning for your retirement.
Go ahead! Rank your debt. Getting out of debt is about to begin!
3 thoughts on “Debt Solutions For Those Looking To Get Out Of Debt”
I think that people hear the word ‘debt’, and they automatically cringe. It’s important to understand that not all debt is bad. Some debt is good, like you mentioned. Most people wouldn’t mind taking on a school loan payment, because of the all of the rewards that an education adds to your life. Some debt is required to start a business or to acquire investment properties. A smart investor learns how to accumulate and leverage debt in the right ways. If you were to purchase a property, and your mortgage payment was $1000 a month, but you rented it out for $1250 a month, that debt that you accumulated is generating income. You would be making money with money that wasn’t yours to begin with.
Bad debt is especially important to understand when discussing student loans in England. They are thankfully at an amazingly low rate meaning you can put the surplus in a much higher savings rent and make money from money being loaned to you!
By the way I was disappointed to see there are only a few articles here but then I realised that this hasn’t been running long. I wanted to say I love the lay out. As a student, I know that students can relate to this better and the name studenomics is catchy and memorable. Well done for setting up such an accessible site. I wish you all the best and look forward to posting more comments about various student financial activities in my life.