Having bad credit isn’t the worst thing to have in the world but in many ways it can be very tough for those who have allowed themselves to be affected as such. Are those collection notes building up? The bill collectors will not stop harassing you after you get off of work or even on Sunday’s when your family is on your mind, well this type of stress of not knowing what to do or avoiding it is not going to make things get better. You can legally eliminate debt and those loved credit cards are going to go into hiding if you absolutely need them but really they should be cut up because it is time that your credit take a front seat. Paying off debt isn’t fun that is why I mentioned the credit cards because essentially all of your debt will have to treated as such. In order to restore your credit back to normal there will have to be sacrifices in the immediate short term such as; no more breakfast at McDonald’s in the morning, the latte from Starbucks or if things are really bad then possibly cutting the cable and internet, these are measures that can be taken immediately to help boost the debt to income ratio but can tremendously help with the long term affects.
Now your serious about legally eliminating debt now what? Complete a financial assessment of your financial situation such as writing down how much you actually make as an income then you write down just how much actually comes in the door that is classified as debt and be precise with both.
Make a list of your monthly expenses, such as rent, utilities, food and other necessities. Be realistic, don’t write down that you can feed your family on $200 a month if you really need $400 to do it. Also, don’t forget your car insurance, fuel and maintenance on your vehicles, especially if you drive or commute to work each day. Do not include your credit card bills in this list.
Make another list of your credit card bills, listing the one with the highest interest first, the one with the next highest interest next and so on. Write down each card’s minimum payment each month as well as the balance.
Now, that you have your data in front of you, you can create a plan to legally eliminate debt and get yourself back on track. Add up your monthly bills list and your credit card minimum payment list. Subtract that total from your monthly income. This is your disposable income and it will play a key role in helping you eliminate your debt.
From now on each month you will be expected to pay your regular monthly bills and all of your minimum payments on those credit cards except for that top of the pile interest rate credit card. That credit card that is at the top of your high interest rate list should have the most money put toward the balance and with that being said your disposable income that you previously thought was set in stone is now not so much. Even though the disposable income is not nearly as much from month to month is less, the goal here is to pay down your debt aggressively so you can have those thoughts of debt free living.
The goal with this is to pay each card off one at a time and when you do that more disposable income due to the lack of debt can go toward paying off the next credit card. This can be done by simply applying the money alloted to paying off the high interest rate credit card that is paid off and apply what you were paying to the next highest interest rate credit card. You want to continue this until there are no more credit cards to pay off and you can move toward paying off your mortgage or vehicle.
Continue in this manner until you have paid off all of your debt. If you are having trouble coming up with disposable income, you may have to let go of a few luxuries such as cable television or internet until you get you finances straight, but it will be worth it.
