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By Deanna Mascle
Debt is a way of life for many Americans. We owe money on our
homes, our cars, our possessions (from furniture to clothes),
and our education. Many Americans are so mired in debt they
aren't even sure just how much they owe and to whom -- even
worse they sometimes don't even remember just what caused
their
debt.
Some debt is good for you. For example, what you owe on your
home can provide a nice way to balance out your income tax. A
little debt is not a bad thing either as making regular
payments to various creditors helps build your credit rating
which makes it easier for you to obtain loans at good rates.
However the truth is that most Americans have more than a
little debt -- and many owe far too much money and are
already,
or soon will be, in financial trouble as a result.
Finding yourself owing a lot of money is not the end of the
road and you can stop your cycle of debt by taking four
positive steps to break the cycle.
First, attack your high-cost debts. This likely includes
credit
cards where you may be paying high minimum payments and high
interest rates. Pay off the balances on credit cards carrying
the highest interest rates first. Continue making your minimum
payments for lower-interest cards but concentrate on paying
off
the highest interest. When the high-cost cards are paid off
then
work to eliminate the balances on your other cards.
Second, reach out to your creditors. If you are going to be
late or have difficulty paying your minimum payments then
contact the credit card company. Even if you can make all your
payments in a timely fashion there are two benefits you can
reap from contacting the card issuer. First, you may be able
to
negotiate lower rates or more favorable terms. Second, they
might be able to recommend alternatives that can minimize
damage to your credit rating.
Third, consolidate your debts as much as possible. You can
accomplish this a number of ways. One possibility is simply
transferring balances from one credit card to another with a
lower rate, but be aware of transfer fees before choosing this
option. Another possibility, if you own your own home, is to
take out a home-equity loan or line of credit which should
have
a lower interest rate than most credit cards can offer as well
as offering tax deductions. Finally, you can also consider a
secured loan offering the value in another form of property,
your vehicle for example.
Fourth, don't sacrifice your retirement savings. Obviously
paying off your debt should be a high financial priority but
cutting what you save for retirement to do so may not be the
wisest course -- especially if that becomes a long term habit
or if you are losing out on your employer's matching funds as
a
result. Perhaps you may be able to borrow against (or from)
your
retirement funds at a lower interest rate which will allow you
to continue to save for retirement while also getting out from
under your debt.
While owing money may well be the American way it can also be
a
tremendous burden to bear. You can shed the weight of your
load
or at least trim it down to a more manageable level by taking
these four steps.
About The Author: Deanna Mascle shares more tips about living
with debt at her blog at AnswersAboutDebt.com
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