I have a friend who is about to foreclose on his home. The holder of his car loan recently came and absconded with his car. He has used up all of his retirement money and is now subsisting on Social Security alone. In a month’s time he will have nowhere to live, no transportation, and he is really too old to get a job.

However, this friend also drinks upwards of $500 of liquor a month. He smokes two packs of cigarettes a day ($300/month), and he plays golf almost daily ($250/month membership fee). This $1,000 he spends on discretionary activities – drinking, smoking, and golf – could more than pay the mortgage and car payment. But, he chooses to live in denial.

Everyone knows someone like this, someone who is living well beyond his means. I once accompanied a friend to a bankruptcy hearing and she insisted we stop at Starbucks for a $4 cup of coffee on the way. To me, the Starbucks was extravagant considering her financial peril, but for her, it was a necessary part of her life.

In order to reduce your debt, you know that you need to either reduce your spending or increase your earning power. Most of us can’t earn any more than we are, so reducing our spending is the key. Evaluating your spending and determining what is necessary and what is discretionary or optional is vital.

Take the time to write down every single thing you spend your money on. Of course you know about the mortgage or rent payment, the car loan, insurance, medical bills, and utilities, but what about the can of Coke you buy at work every day, or the $4 beers you drank last night in the bar? What about the newspaper you have delivered (that you could read online for free), or the expensive latte you pick up on the way to work (that you could have at home or work for a fraction of the price)?

The key to reducing your outgoings has always been to create a budget based on your current income and compare it against all of your outgoings. Then, start crossing off the costs that are not absolutely essential – the beer, the coffee, the new shoes, even the cable television – until you get that number down below your income. By creating a budget – and sticking to it – that allows a little room for emergencies, you will start to save money that can be used to pay your debt down.

Most people today have multiple credit cards, and many of those credit cards are over their credit limit. Do you know that the minute you missed the first payment (even by a day!), your interest rate went through the roof? The credit card that seemed so cool because it was 0% interest and came with a picture of your family team isn’t quite so groovy now, is it?

So, if you have run up your credit cards and times are getting rough, you might not think that it is a good time to start paying MORE each month on your credit cards, but it is. The more you pay, the quicker the debt will disappear. By dragging the debt on, year after year, you will be paying for today’s latte five years from now.

Let’s take a simple credit card with $1,000 worth of purchases on it. If you pay $25 each month, at 19%, it will take over five years to pay off. If you can double the amount paid each month to $50, it will only take you two years. Surely, you can $25 hanging around the house. Just skip 5 or 6 lattes a month and you will have the extra cash. If you fall upon hard times and can only pay $15 per month, you will NEVER pay that card off – the interest will accumulate at a rate faster than you can pay.

You may think that you simply can’t find any extra money hanging around, but you almost always can. For instance, do you really need all those movie channels on your cable television? Better yet, couldn’t you do without cable television entirely for a year in order to pay off all of your debt? Undoubtedly, most people can save on their food and entertainment costs as well as their utilities. By reducing the temperature in your home just a couple of degrees, you could save several hundred dollars a year.

Increasing your dept repayment can have more than just a bit of an impact on your credit situation – it can have a lot! Imagine paying off all of your debt in less time – three years in the example above – just by paying a little more every month. Skip a few expensive coffees, drop the gym membership for a few months, or carpool once in awhile and you may see yourself debt free years earlier.

With the economy being as bad as it is right now, it may seem like an unrealistic goal to clear yourself of all of your debt. In fact, you would be lucky to pay your bills on time. But, clearing yourself of all your debt is possible and the sooner you get to work on it, the quicker it can happen.

So, what does it feel like to finally clear all your debt? Can you even imagine it? When was the last time you had no doubt? For most people, the last time they were debt-free was in high school. For others, the only time they have been debt free was the day their bankruptcy case went to court. For most adults, they will live their entire adult lives completely in debt.

It wasn’t always that way. There was a time, not too long ago, when people actually did pay off their mortgages (on time), and drove cars that were completely paid for. People once went to college only when they could pay for it (no students loans), and bought an engagement ring for their bride only when they had saved up three months’ salary.

If you want to know how it feels to be debt-free, talk to your grandparents. Most likely, they were debt free for at least half of their adult lives. They probably didn’t go to college, and were married only when they could afford a wedding and a down payment on a house. They paid off their house, and kept their car for long after it was paid off. They never leased anything. They probably retired not long after paying off their house, and lived on a fixed income without living off of credit. Their assets were limited, but they were not in debt.

To rid your life of fear, stress, and the possibility of bankruptcy, it is imperative that you head toward living a life free of debt. You need to save whatever you can, pay off credit cards with high credit rates, refrain from buying a new car unless you absolutely have to, and say “No!” to credit card companies who want to offer you zero interest rates only to raise it when you are late with one payment.

Resist the temptations of “keeping up with the Joneses” and don’t put yourself into debt just to have the next new thing. Living a life that is clear of all debt is a wonderful thing!

When economic times were rosier, we all bought a lot of things that we no longer need. Whether we were buying clothes at record pace, or buying trinkets on vacation, our homes are now full of things we no longer need. Now that times are rough, by getting rid of some of this stuff, you can clear the clutter and make some extra money, too.

There are three main ways to sell your unwanted belongings: sell them online, have a garage sale, or sell them on consignment.

By selling your items online, you have an entire world’s worth of potential buyers. There is almost always someone, somewhere, who wants your stuff. If your browse through Ebay, you will see some incredibly useless, horribly ugly, or extremely specific items that have multiple bids. If you think your items can’t sell on Ebay, you are wrong. They can and they will. All you have to do is list your item and let the bidding begin.

If you have items that are too large to sell on Ebay – for example, furniture, automobiles, or very fragile items – you may want to try selling them on Craigslist.org. By selling on Craigslist.org you reach a more local market and can sell the items without paying any fees. Use Craigslist.org with caution, however, as there is no protection between you and the buyer. Make sure you receive cash (no checks!) for the items you are selling, and meet the buyer in a neutral, safe place to make the transaction.

If you have multiple items that you want to get rid of quickly, nothing beats a garage sale. By putting out just a little money to cover costs such as signage, price stickers, and maybe an ad in the local paper, you can set up a garage sale quickly and sell your items the same day. Make sure you start early (most garage sales start as early as 7:00 a.m.), have plenty of help, and set your prices for the goods ahead of time. And remember, the more signs, the better!

An alternative way to sell your unwanted belongings is by taking them to a consignment store. This works particularly well for large items such as furniture or cars. The consignment store will take a percentage of your sale price in exchange for housing your item.

Of course, you can always just place a classified ad for your larger items, but the number of people who see the ad may be limited. It is best to advertise your unwanted belongings to the largest market you can and that is where services such as Ebay and Craigslist come in.

Everyone has a friend who is eternally in debt. For me, Dave (not his real name, of course!) is about to go into foreclosure on his house because he stopped making payments four months ago. He has not spoken to the mortgage company because he is scared he will be kicked out – which he will very soon. Dave’s car was repossessed weeks ago for similar reasons. He has blown through his retirement savings and is now relying on a small fixed income from the government to pay for a very expensive lifestyle.

You see, Dave likes to play golf. He plays almost every day. And, when he’s done playing, he hangs out in the clubhouse bar, drinking and smoking and buying drinks for people. He smokes two packs a day.
Maybe your friends aren’t blowing through money at the pace that Dave is, but it isn’t rare to see a person with tremendous financial troubles living their life in complete denial. Dave knows he is in trouble but can’t bring himself to deal with it.

If you have a friend like Dave, the best thing you can do is bring his spending to his attention and ask to help him negotiate with his creditors. Any creditor who isn’t contacted will foreclose, but a creditor who feels there is a chance at repayment will usually negotiate. It is your job, as a friend, to help the process begin.

After identifying your friend’s creditors, sit down with him or her and have a serious talk about their spending. By creating a budget and writing down every single them they spend their money on, they will have a better idea of their financial situation. They will also have a better idea of where they can cut expenses. Most people spend more money on a daily basis than they ever imagined. By writing down every cost, only then can costs be reduced.

Once you have helped your friend make friends with people who are owed money, and found places to cut expenses, help your friend further by not inviting them places they can’t afford to go, and not telling them about purchases you are making. If they feel they are being left out, are not able to do things that everyone else is doing, they won’t stick to their budget.

Be considerate of the effects their change in lifestyle is having on their everyday life and psychological well-being. Do the best you can to help them clear their debt and remain within their budget well after the debt is gone.

For many of us, these are not good financial times. Many, if not most, people are in debt. A lot of us have student loans to pay back, a mortgage, a car payment, and more credit cards than we even know we have. Society has taught us over the past few decades that we NEED it if it is new and improved and we have bought into this fallacy. Now, we are in debt and we can’t pay it back.

If you have ever considered bankruptcy, you need to know the facts. First of all, bankruptcy doesn’t “wipe out” your debt. Few bankruptcies go through without the debtor having to pay back at least part of the money owed. Secondly, bankruptcies do not disappear from your credit record. Yes, certain aspects of it roll off your credit record in seven years, but many will stay for ten years or even longer. When filling out an employment or credit application, you will always have to answer “Yes” to the question of bankruptcy. That never goes away.

Many people see debt consolidation as the last resort before bankruptcy and for good reason. Debt consolidation is a good way to have someone else negotiate your debt on your behalf and pay off what you can, when you can.

Most debt consolidation companies work by identifying all of your debts and then contacting your creditors. By doing this, the creditors no longer have the right to talk to you directly. This also means that you can answer your phone without fear!

The debt consolidation company works to lower your interest rate, or eliminate it completely, leaving you just the principal to pay back. By doing this with all of the creditors, they create a new total debt that you owe and they consolidate it – roll it all into one amount – and create a payment schedule for you, which you can realistically stick to.

For many people, this consolidated and reduced debt can be the difference between eventually living debt free or going bankrupt. However, there are many unscrupulous debt consolidation companies out there, so be very careful who you deal with.

Remember, you are giving them access to your social security number, your credit report, and all of your credit information – so make sure they are legitimate. Do your homework and find a reputable company to work on your behalf and you will find that debt consolidation can be a really good idea who are over their heads in debt.

When most people think of credit cards, they think of the damage that their overuse can ensure. By running up high balances, paying extortionate interest rates and fees, many people get themselves into serious trouble. It goes without saying that you have to be careful when dealing with credit cards and if you can survive without ever owning one, you are the winner. However, for most of us humans, a credit card is a necessity for many reasons.

You may need a credit card to book a hotel room, reserve a rental car, or buy something online. Credit cards are useful when making large purchases because of the insurance that comes with the purchase. But there are few other reasons to have one unless you don’t need it.

You can use credit cards to your advantage, however, by using them to help clear your debt. Of course this only works if you credit is still in good shape, but if it is, you can utilize credit cards in a way that the credit card companies don’t want you to know.

Many credit cards offer new applicants may advantages that your present cards don’t. For instance, plenty of cards offer a zero percent (0%) interest rate for balance transfers. By taking advantage of this offer, you can transfer balances that are currently sitting on other cards at anywhere between 9% and 29%. By doing this, you can save thousands of dollars over the life of the debt. Do this with caution, however, as missing just one payment, or paying just a day late on the new credit card and bump this interest rate from 0% to over 20%, reducing any advantage you may have had.

You can only do this a few times because opening new credit card accounts can take a quick and serious toll on your credit score. In order to keep your credit score sufficiently high for further purchases, it is best to not apply for too many credit cards, and keep your balances low. Many credit rating sources state that credit scores are based not only on how much you pay, but also on how much of a balance you leave behind.

It is worthwhile to keep a small balance on a credit card and keep paying that on a steady basis rather than pay off the credit card altogether. Either way – pay off your credit card entirely or keep a small balance – you are always better off than if you had no credit card or a credit card with an overextended balance.

Living a debt-free life is what everyone wants. The benefits of
clearing debt are endless, and freedom is the best one. Freedom,
in this sense, can be broken into five aspects.

This article examines the five sides of freedom, all of which
speak of the many benefits reaped after minimizing your debt.

1. Freedom from interest rates. Yes, debts are tantamount to
interest rates. Sometimes, your debt gets too unmanageable that
what you’re actually paying for each month is just the interest
rate. So no matter how regularly you pay your monthly obligations,
you still feel that your debt does not get any smaller. This isn’t
just a feeling, this is reality. Now, without debts, there will be
no interest charges to take care of.

2. Freedom from too much work. When you owe others money, you are
constantly thinking of ways on how to augment your monthly income
just so you can fast track your payments. Relying on your earnings
from your regular job may not be sufficient as all of it is
practically allocated to something. Therefore, the more debt you
have, the stronger your urge to find other sources of income is.
Naturally, more work means more time.

A debt-free life benefits you by giving you more time for yourself
and for your loved ones. You spend less time at work, which, in
turn, makes you more positive and more satisfied with life.

3. Freedom from controlled spending. In other words, this means
being able to buy anything your eyes feast on and anything your
heart desires. If your purchasing power is limited due to bills
and other payables, you decide to sacrifice that overpriced
handbag, the expensive stilettos, or the state-of-the-art mobile
phone. However, if you are on the way of clearing your debt, you
now have enough space on your mind to think about flaunting that
expensive item. To the young professional, this particular benefit
of debt-free living is the most appealing.

4. Freedom from stress. You would be the first one to admit that
debt adds to your level of stress. Stress from debt comes in many
forms. You get stressed simply by thinking about your next monthly
payables and how they have eaten a large chunk of your regular pay
check. You get stressed from working too much just so you can reap
overtime pay, or get perks for working late. You get stressed for
trying to figure out where you will be able to get funds for the
next billing cycle. All these lead to body aches and pains as your
mental anguish is manifested in your physical state.

Being sick makes you more stressed because you are thinking of the
lost income for a day’s absence at work. The cycle goes on and on
and it never ends unless you willfully do something about it.  
This just goes to show that clearing your debt is beneficial to
you, your health, and your overall well-being.

5. Freedom towards living your life to the fullest. Most people
choose a job according to the degree of financial freedom it can
promote. For the most part, they get a job that will let them earn
the most money with the least effort. They tend to forget about
their passion and dreams. As long as the salary can pay for their
lifestyle, their debts, and their necessities, the job is good
enough.

Most likely, this is your dilemma when you owe money. You continue
to deceive yourself and proclaim that what you are currently doing
is exactly what you want out of life. Of course, you do everything
in your power to keep that job. Otherwise, you will find yourself
not only debt-stricken, but penniless and homeless, as well.

If you are in the prime of your life, you cannot choose to retire
yet because there are still mortgages to pay. Simply said, having
a considerable amount of debt imprisons you and keeps you from
doing what you really want.

Now, with all your debts cleared, you can follow your dreams. The
primary and the most important benefit of debt-free living is
being able to live to the fullest. Finally, you can now chase your
dreams, travel all you want with your loved ones, buy the stuff
that you so want to own, and even do social work. All these you
can do without having to think, not even for a second, on how
you’ll manage to pay your mortgage or your credit card bills.

The benefits of clearing debt go far beyond the five borders of
freedom stated here. Being free from debt also leads to a more
positive outlook in life. And being optimistic about life is the
best state of living that you should be in!

Everyone has debts. Some are simple and can be paid off the next
payday. Others are more complex and come with compounded interests
– and unless you know how to clear debt, these liabilities will
continue to pile up, gain more interest, and become increasingly
harder to pay off. It does not even matter what these debts are or
how you incurred them in the first place. What matters is that you
pay them off. Put yourself in a better position to do this by
brushing up on how to clear debt. Not only will this knowledge
save you from further financial difficulties, it will also help
improve your credit score.

Here are simple tips on how to clear your debt. These tips are so
simple you can do these by yourself, without having to contact any
consultant, credit counselor, or a sympathetic,  financially-savvy
friend.

1. Better Money Management

The first thing that you must do when you decide to minimize and
ultimately clear your debts is to understand the inflow and outlow
of your money. Keep an up-to-date list of your regular monthly
spending and see which items you can cut corners on and what
services you can forego. Naturally, the only way you can do this
is by making a clear distinction between necessity and luxury.
Once this is done, create a monthly budget you can stick to. As a
rule of thumb, you should set aside 10 to 20 percent of your
income as rsavings.

2. Extra Income

Now that you need more funds to pay for spending made in the past,
your current income level may not be enough. If so, then it’s time
to look for another cash cow. Who says your disposable income
should only come from your day job? Many hold between two to three
jobs. It’s hard yes, but remember, living in debt is even harder.
So, consider the skills that you havr and identify how you can
make the best use of them. You can design websites, pen press
releases, or write articles. The money you make from this side
gigs can help clear your debt. After all, there are no limits to
what you can earn when you are your own boss. You negotiate just
about everything with the client – price, deadline, project
requirement, rates – and agree on a deal that is to your best
interest and his.

Remember, though, that a side gig is a side gig. It should not get
in the way of your day job. If you want to clear your debt using
money you worked hard for, learn to make the best use of your time
and resources.

3. Lifestyle Change

Have you noticed that the more you earn, the more you seem to
spend? If you answer this, then it’s about time you change that
habit. Pare down your expenditures and live according to – if not
below – your means. Watch less movies, keep dine-outs at a
minimum, purchase only things that are on sale – these may not
sound like incredible torture but it’s not. What it is is
necessary. If you want to clear your debt, then manage your
lifestyle so that you can have fun and at the same time, save
more.

4. Relationship with your Creditors

It is important to keep a positive and professional relationship
with your creditors. This way, you can easily talk to them when
you encounter problems. If you have every reason to believe you
will miss a payment, contact them right away and long before the
due date. They will not wholly release you of your responsibility
but they will appreciate your honesty. What’s more, your creditor
may even agree to iron out a deal with you. They could give you a
grace period or knock down interest rates a bit. You see, no good
deed goes unnoticed; and the same holds true when you are clearing
your debts.

These four pointers on how to clear debts are easy to understand
and even easier to do. Make them part of your habits. When you do,
you can be well on your way towards a debt-free life!

Who doesn’t know what debt is? We all do. At one point or another
in our lives, we have all been in debt. Whether it is financial
debt or a simple matter of owing someone a favor, debt is debt; it
has to be repaid. The problem with debt, though, is that the
longer it takes you to pay it, the larger it becomes. Do not
become a victim of interests that never stop accruing. An
introduction to debt consolidation may be just what you need to
put your finances in better order. Debt consolidation is the
process of acquiring one loan to pay of other loans. If you owe
five different card companies, for example, you could take out one
big loan to pay of all five debts. But wait! Why do that? Doesn’t
that amount to more or less the same arrangement? Ultimately, you
will still owe someone - and this sum will simply be the total of
all five debts lumped together, right? Wrong. This article will
provide you with an introduction to debt consolidation, so you’ll
know whether this alternative is good for you.

The concept of debt consolidation is really quite simple. In fact,
this introduction to debt consolidation may be all you need to
decide whether or not you should go for it. Have you ever tried
borrowing money from a friend so you could pay rent, the
utilities, and the woman who cleans your house twice a week? That
is actually a form of debt consolidation. You get one big loan and
use it to settle ALL of your smaller loans. There is a catch to
the process, however. You will be required to put up an asset –
perhaps your house – for collateral, in case you are not able to
pay off this new but bigger loan.

Debt consolidation has many advantages. For one, it allows you to
combine an assortment of unsecured  into one debt. This means you
no longer have to mail out checks to five different credit
companies or banks. All you have to do is make a single payment to
the company you got the loan from. You no longer have to dodge
creditors who mail and call you non-stop to collect.

Another advantage of debt consolidation is minimal finance
charges. Because the loan is secured, the lender does not have to
worry that you will not be able to keep your end of the bargain.
The worst that could happen is that you will default on the loan.
When you do, the lender will have full ownership of your
collateral, in this case your house. It’s a win-win situation for
the lender and for this reason, interest rates are lowered.
Consequently, a considerable portion of your monthly payment is
directed towards repayment of the debt itself. And, because your
loan is a new one, you get to extend the term of your loan, too.
Instead of paying lump sums for the next six months, you can
spread the term up to 24 months. This reduces the payments you
have to fork out monthly.

Debt consolidation is not without it’s risks, though. The greatest
one is the possibility of losing your property. So, in making your
decision, weigh this risk against reduced interest rates, lower
monthly payments, and the elimination of late payment fees. Do
your research, too. If you are seriously considering debt
consolidation as the answer to your debt woes, read more about the
concept. This article is only an introduction to debt
consolidation. It does not tackle the nitty-gritty of the process.
Alternatively, you may also consult financial counselors and
surely, they will be more than happy to walk you through the ins
and outs of debt consolidation.