With Christmas 2 weeks away, probably the last thing on your mind is debt reduction. Well, it shouldn’t be! No, now should be a time when you begin to really push towards your goal of getting out of debt, by setting yourself up for a good 2007. Here are some ideas:
1. Make a list of your current creditors (the people or businesses to whom you owe money) along with their address, phone numbers, and other account information. You can do this with a simple spread sheet or a piece of notebook paper.
2. Make a list of your current account balances.
3. Arrange your accounts lowest balance to highest balance.
Now, you have a good picture of your over-all debt situation, and you are ready to roll when January comes along. Now:
1. Do you have multiple credit card balances? Well, now is the time to begin searching for a really good low rate credit card so that you can “surf” your balances for a lower rate. Be careful!!! Things to watch out for: Really, really high balance transfer fees, dubious credit card practices, and a too-short period of time for paying off your debt before the teaser rate goes away. My opinion: Stay away from balance transfers and other consolidations unless your rates are really high, and if you must move your balances, understand exactly what you are doing.
2. Are you paying extra towards an auto or home equity credit line? Send two checks, one for your monthly payment, and one CLEARLY marked: APPLY TO PRINCIPAL. Auto loans and home equity loans come in many, many flavors, and you want to be sure that you are not simply prepaying next months payment (i.e. your money is held in a separate account and not applied to your account balance).
3. You do NOT need a debt consolidation company. You can do the EXACT things that they do, only you can do it for free, and you don’t have to worry about their honesty or their lack thereof.
4. Contact your credit card companies and ask them to reduce your interest rate. Be persistent. If they say no, ask why, ask to speak to a manager, be polite, try again. Keep trying, calling once or twice a month, always calling AFTER you have made your monthly payment, so that they can see that you have been a good customer. Don’t expect miracles. If you are at 22, they are not going to drop you to 5. But, if you are at 22, they might take you down to 17. If you are at 17, you might get a 12. Who knows? Just keep calling. And, after they have reduced your rates, wait a month or two, pay your bill early and on-time, and call again. Rinse, repeat.
Now you are ready to tackle your debt. You have a list of the companies that you owe, you have a list of how much you owe, you are working on lowering your interest rates, and you are ready to develop your strategy. You are going to GET OUT OF DEBT! You just need one-more-thing.
Determination. You MUST be determined to get out of debt. I have never met a single person who was debt free who just “stumbled” into their freedom. You must be willing to work hard, prepare, and execute. Only YOU can change your financial destiny.