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Excessive Debt Hurts More Than Your Wallet

We all have good intentions when we open up our first lines of credit or take out those student loans. We’re sure that we will never become one of those people–the people who find themselves mired in five figures worth of debt and only a middling income with which to make ends meet. Unfortunately, what most of us don’t realize is that this type of debt rarely happens quickly. Instead it builds slowly over time–a missed payment here or there, a medical emergency, etc. Finding oneself in extreme debt is uncomfortably common in today’s “buy now, pay later” culture. We are all sure that we will earn more money in the future to pay off whatever it is we’re impulse buying now. For most of us, though, all that happens is that we build up a mountain of debt. A mountain that we can do little more than chip away at a tiny bit at a time. Good Debt Vs. Bad Debt Of course, not all mountainous debts are bad. A mortgage, for example (if you pay your bills on time every month) is considered good debt because it builds equity. A car loan is a less expensive example of ...

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Prioritizing Debt: What to Pay Off First

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Paying down debt can be intimidating. Even after you’ve decided to focus on reducing debt, knowing where to start can be tricky. For consumers, understanding which debts to pay first can mean thousands of dollars in savings. Not all debts are created equal — some can hurt your credit score, and others may have higher interest rates. Here are some factors to consider when deciding which debts to pay down first. Know your interest rates Interest rates vary widely. According to NerdWallet, a personal finance website, the average interest rate for credit card purchases is 18%, while Experian has found that the average interest rate for a new auto loan is only 4.76%. In many cases, the right move would be to focus on paying down credit card debt. However, look carefully at your interest rates to determine which of your accounts is most costly. If you have high-interest credit card debt, you can save money by transferring your balance. Credit card companies offer balance transfer credit cards that allow you to move high-interest credit card debt to the new credit card with a 0% introductory interest rate. Fees for this transfer typically range from 0% to 3% of the ...

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Tackling Debt Like a Pro

When debt begins to rear its ugly head, it’s best to tackle that monster in a hurry. Once you begin to accumulate debt, it grows and grows at a hefty rate. Depending on your interest rate and terms, you could be racking up anywhere from 3 to more than 30 percent annual interest, which accumulates each month. As debt grows, so do the damages. An unwieldy amount of debt can severely damage your credit rating, making it hard for you to buy a car, buy a house, or get a business loan. If your debt-to-income ratio becomes too large, you may be in for even more financial turbulence. If your debt grows too large and you are unable to pay, creditors may decide to go into the collections process. Going into collections wreaks havoc on your credit report and can lead to your hard-earned wages being garnished or your assets being frozen. So now that you’re sufficiently scared of that ugly, evil monster – Debt – it’s time to figure out how you can conquer it while it’s still a hatchling. The good news is you’re not alone. On average, Americans carry the burden of more than $15,000 in credit ...

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How To Stay Motivated When Paying Off Debt

stay motivated when paying off debt

Hopefully those of you who have resolved to make this a debt payoff year are still holding fast to your resolutions. As I’ve started to notice the crowed of new gym users waning in recent days, I can’t help but think others might be struggling with ambitions goals set for the new year. From experience, I know it’s hard to stay motivated when paying off debt. Anyone can to anything for a short period of time, but how about when fixing a problem takes months or even years? Have a Reason for Paying Off Debt It’s important to have a reason for paying off debt. Of course less debt means greater financial stability, but having a more personal reason is a better way to stay motivated. Write down what you hope to achieve once you’re debt free. I want to pay off debt: so my kids don’t have to support me in retirement. so I can spend more time doing what I love instead of working. so I can handle whatever life throws at me without wondering how I’ll pay the bills. so I can take my parents on a trip they’ve always dreamed about. Your reason might be aspirational ...

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Five More Reasons to Become Debt Free

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Everyone knows that paying off debt is a great way to build wealth and ensure that setbacks and emergencies won’t send you into a downward money spiral. For that reason alone, kicking debt to the curb is always a great idea. Since paying of consumer debt a few years ago, I’ve also discovered some new reasons to become debt free. Great Career Opportunities When we were working to pay off our credit cards, there was no way on earth Jim or I could have thought about changing jobs. We were too dependent on our paychecks to seek out or take advantage of other opportunities. In fact, I really didn’t see lots of opportunity other than one foot in front of the other. I’m not sure if they weren’t there or if I didn’t have the flexibility to see them, but I know changing jobs was not an option during that period of life. Now that we don’t have consumer debt, it seems that job offers are pouring from the rafters. Besides my full time offer from the government, Jim was asked to take on a new management position a few weeks ago. While we most likely won’t accept either of ...

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