Elimination of debt
The general understanding about debt elimination is to pay it off incrementally, over a period of time. This is what financial experts too advise. No doubt, it is a good advice ant there is no second opinion about it. However, there are other options also available for debt elimination. Some of the options are:
Refund of taxes (advance taxes remitted) is an obvious one, and this amount may be dropped on debt. A good number of debts can be cleared by this refund. Now, a strategy that will be controversial: increase tax withholding deduction so that tax refund each year is bigger. The money would be better invested in something that actually earns dividends, but remember, this plan is for people that have problems with saving and investing and paying off debt incrementally. Annual Bonus or incentives earned in employment may be utilized for clearing most of the debts. Valuable gifts presented on special occasion may be used for clearing debts. Money obtained on sale of excess assets like extra computer, furniture. Clothes, books, valuable CDs, jewellery through EBay, may be used for clearing some of the debts. Likewise a unwanted second car may be sold and debts cleared. Instead of going in for a new second car, a second hand car may be purchased and the money saved on purchase of second hand car may be used for clearing debts. An extra hour or two each day (wake early, work during lunch, or find some time after work), may be utilized usefully for doing some freelance work on the side. Then use the big payoff for debt. Income generated from blog such as ads etc may be accumulated for clearing debts. Winnings from gambling, lottery may all be used for clearing debts.
In today’s world everything is going up except wages. People find themselves difficult to pay off their debts as their income is enough only to meet their necessities. Many people contemplating themselves a bankruptcy filing and that is also not easy. It will stay on record for several years. People are breaking their head to chart out a plan for debt elimination. They do consult several financial experts and obtain credit counseling.
The simple and ultimate method of debt elimination is: 1) Set a monthly amount. 2) Pay all minimum amounts. 3) Pay extra money toward the debt with the highest interest rate.
This method will ensure that you pay the least amount of interest and repay your debts as soon as possible. The trick to paying the least amount of interest possible is to pay extra money toward the debt with the highest interest rate. The trick to paying off debts in the least amount of time is to set a fixed total amount to pay each month. The trap many people fall into is that they only pay the minimum payments. These minimum payments are designed to keep you paying that high interest rate for as long as possible.
By paying a fixed total amount each month, as one debt is paid off, there will have more money to pay towards another debt. This is often called the "snow-ball" effect.
But first things first. The services of non-profit making credit counselors may be utilized to chart out a suitable debt elimination plan. Cut all the unnecessary credit card expenditure to leave a sufficient amount for paying off high cost debts. Always keep an eye on spending pattern for several months. Cutting down telephone bill, postponing unnecessary purchases, canceling subscriptions of unnecessary journals, clubs etc. will leave sufficient money to pay off debts quickly.
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by: spivey003
Date: Apr 25th 2008 | Words: 612 | Viewed: 12 times | Rating: Not yet rated
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