In America’s society today debt has become something that America believes is necessary. In order to have anything nice you need to go into debt for it. Many people believe they are entitled to everything and don’t need to work for it, just go down to the bank sign your name and you can have a brand new car. That attitude is what brings on unnecessary debt.
How many of you own your homes? How many of you own your cars? I don’t mean that the title is in your name, I mean how many of you own them debt free? The problem is debt is just as much a part of life as money is. Debt and money go hand in hand. It is unlikely you will go your whole life with out debt. So is debt bad? Yes and no.
Most of us buying our first homes go into debt, most businesses that start up barrow money from one source or another. Debt that is going to make us money in the end is good. Most of our homes will appreciate in value and most business will pay the debt off with their revenue. But, debt that gains us nothing is bad.
You buy a brand new car for $15000, drive it of the lot and you just lost $5000. Vehicles will always depreciate in value. You use your Visa credit card to buy a brand new TV for $2000 and spend $1000 on a brand new wardrobe, in most cases you have lost all of that money plus the interest. Nothing wrong with owning these items, but imagine if you worked hard and paid cash for them.
So how can you become debt free? The best way is never go into debt in the first place. But, since that is not possible in most causes the next best thing is never go into unnecessary debt. I bought my first car, a 1991 Nissan Pathfinder, at age 16 for $600 and put a new transmission in it for $600. All together it cost me $1200 and it still runs to this day. I keep up on it and it has never had any major issues and I still take it on long trips. I would say I got my moneys worth. It’s not the nicest looking vehicle out there, but it gets me were I need to go.
Well what do you do if your already in debt and you are trying to get out? First things first you need the desire to get out of debt, because if you don’t you will just keep getting deeper and deeper in it. Like becoming wealthy getting out of debt takes discipline. Next get ride of temptations. Cut up those credit cards. Sell that car that you are paying $500 dollars a month on. There are very nice cars out there for cheap. A new car selling for $30,000, a year later could be selling for $20,000.
The bottom line comes to this, the only way to get ride of debt is to pay it off. In order to do this you need to establish a plan and then once your debt is paid off don’t go into more debt. Make sure that your plan consists of paying more than the minimum payment. Most of the Minimum payment on most loans goes straight to paying the interest off. In your plan set an amount above the minimum payment to go to reducing the principle amount of the loan. Make sure to fit this into your budget as well. CnnMoney.com has several debt calculators that could prove help full in planning your debt reduction. To view them go here http://cgi.money.cnn.com/tools/index.html.
Another tip is once you pay a certain debt off, keep making that same payment to your savings account. For example; if you are making a $200 car payment a month and are still getting along fine in your finances, once it is paid off pay to same amount to your savings every month. If you can practice these principles you will start to see your net worth grow even faster.