Got Debt? I’m hoping for the majority of you, the answer will be – "No". However, there will be some women out there that owe some amount of money to someone. As a society, we have accepted debt as a normal part of life. 70% of Americans are living paycheck to pay check, and some of us spend 125% of our income. This means we are perpetually going into debt. And we have believed many myths such as “the home equity loan is good for consolidation and is a substitute for an emergency fund.” The truth is the last thing that you want to do in an emergency is go into debt. Since the Bible says that the borrower is slave to the lender, we should strive to not owe man anything. To that end, I would like to share a very practical way to get rid of your debt.
The first thing you must do is stop borrowing. Next you must save money. Stop spending everything that you make. You can also sell some stuff to get your debt balances paid down. And there is always the part-time job or working overtime temporarily.
Once you boost your disposable income by selling things or working more, here is how you can get the debt snowball rolling. List your debts in order, from the smallest balance to the largest. Don’t be concerned with interest rates, unless two debts have similar payoff balances. In that case, list the one with the higher interest rate first. As you start eliminating debts, you’ll start to build some serious momentum. These quick wins will keep you motivated, so you’ll be able to stay on track.
The idea of the debt snowball is simple: pay minimum payments on all of your debts except for the smallest one. Then, attack that one with gazelle intensity! Every extra dollar you can get your hands on should be thrown at that smallest debt until it is gone. Then, you attack the second one. Every time you pay a debt off, you add its old minimum payment to your next debt payment. So, as the snowball rolls over, it picks up more snow. Get it? Your new payment is the total of the previous debt’s payment plus the current debt’s minimum. As these payments compound, you’ll start making huge payments as you work down the list.
In order to activate your disdain for credit cards and borrowing, here are a few statistics to think about:
•The average household credit card debt has increased approximately 167% in the past 17 years.
•The average balance per credit card-holding household is more than $9,300.
•It would take over 13 years to pay off the average credit card balance if only minimum monthly payments of 4% at an average interest rate of 15%.
•Credit card interest rates are often raised when a cardholder takes out a new loan, such as a mortgage, car loan, or other type of credit account.
•A single, first offense late payment can immediately raise a cardholder’s interest rate as high as 34%. A “late payment” is defined as anything that posts after 2:00 pm on the due date.
•In addition to increasing the cardholder’s interest rate, a card issuer can charge a fee of typically $29-$39 for a late payment.
•The credit card industry takes in $43 billion per year in additional, unexpected fees from the consumer, such as late payment, over-the-limit, and balance transfer fees. Late fees alone bring in more than $11 billion.
So do you hate debt yet? You should because it has no love for you. Let’s get it together ladies. Cut the ties to the slave-driving credit card companies, pay them off once and for all, and never turn back!
Peace & Blessings
Sharon
I will have more for you on Monday, September 6th! Until then keep working your plan for financial peace and freedom.
Tuesday's Blog: We have a special guest writer Marcia Stehouwer, from Calgary, Alberta Canada. She's read a book that Sharon suggested and she's going to share a bit of her journey on changing her finances. Please make sure to join her.
No comments:
Post a Comment