How to Establish an Effective Debt Elimination Plan – Guest Post
Debt elimination is not something you can do on the fly. It takes a certain amount of planning in order to orchestrate a solid debt elimination plan. Even with a plan, it is possible for things to come up unexpectedly but having a guideline makes it a little easier to find your way back to solid financial footing.
What’s In a Debt Elimination Plan?
There are no hard and fast rules involved in a debt elimination plan other than the fact that your priority is to pay off your debts in the fastest time possible while still managing to meet your other financial obligations. Since consumer debt is all different, different practices will be necessary within a plan to get the job done.
Some of the things to consider within a plan should include:
A budget will be your biggest guideline in the elimination plan. It will allow you to better understand how much money you pay out every month and within your budget you will be able to find some extra cash to dedicate toward your debt elimination plans.
The extra cash you need to eliminate some of your expenses in order to put more money towards debt elimination is often found as ‘luxury’ expenses within your budget. For instance, if you pay $100 a month for cable, you surely can make better use of that money when paying off debts. This means you will have to stop your cable service, even if only on a temporary basis, and redirect the money towards your debt repayment. By writing down the various expenses you don’t necessarily need to live, you can see how much ‘extra’ cash your sacrifices will free up for debt payoffs.
Find Supplemental Cash
Depending on the amount of your outstanding debts, it may be necessary to not only cut your regular spending but to also add more cash to your situation. A part time job or a second job to earn additional income may be the best option on a temporary basis. You may also consider selling your belongings on the Internet auction sites or by hosting a yard sale at home. Borrowing cash may be an option if you have a good credit score to back up your credit application. Borrowing cash from family and friends can be a touchy situation but one you should consider if you feel it would work out.
Using your math calculations, you should be able to get an idea of how long it will take you to eliminate your debts based on the ‘extra’ money you have directed to your debts. Write out estimated timelines to make it easy to see where you are and where you are going. Having a visual of your target days and a record of your accomplishments can go a long way towards personal motivation.
One key ingredient to better control over debt is the ability to stop spending, especially on credit. The less you spend outside of the necessary and the more you can stash into savings, the more stable you will be with your overall financial outlook. Reduce your spending as much as you can and pay attention to how you shop in order to make permanent changes to your financial life.
Track Your Credit
As you make headway into your debt elimination, be sure to regularly check your credit reports and scores for accuracy. If you don’t take your credit into consideration, wrong information can hurt you for many years to come. Stay on top of your credit not only for your own piece of mind but to ensure someone else is not living the high life on your credit profile. Fraud is detectable on credit reports but you have to analyze your information to find such incidents.
Just like a budget, a debt elimination plan needs to be flexible and kept current as time and money matters change. A debt elimination plan should keep you on track and motivated toward reaching your goals, as well as helping you repair any credit problems you might have. Once you achieve your debt elimination goals, make a conscious effort to avoid debt in the future and continue to find the financial discipline necessary to build a solid financial foundation.
Ed O’Brien is a seasoned writer in personal finance, specializing in credit repair..