Steps to Financial Freedom
1. Manage / Downsize Your Debt
Plan ahead when using credit. Set up a budget to ensure your income will support your living expenses and debt.
Track your credit spending. Keep your non-mortgage credit payments to 20% or less of your take-home pay.
Stop charging if you are spending beyond your means.
Call your credit card companies to ask them to lower your interest rates. Many will do so if asked.
Pay off your high interest rate cards first to save money and get out of debt faster. To see faster progress, pay off one or more of the smaller balances first.
Consider using savings to pay off debt. However, do not deplete your savings for emergencies and periodic expenses.
Pay more than the minimum scheduled payment. For example, if you make only the minimum payments (2.5% of balance, $10 minimum) on a $1,000 balance with 17% apr, it will take 12 years to pay off the debt and will cost $979 in service charges!
2. Deal with Creditors
Contact your creditors to set up a repayment plan. Note the full name of the person with whom you speak. If necessary, speak to a supervisor who has the authority to make decisions.
Follow up all conversations with a letter mailed certified receipt requested. All arrangements should be confirmed in writing.
3. Improve Your Credit
Review your credit report to determine if it is accurate and dispute incorrect and outdated information.
Develop a spending plan to determine how much you can afford to repay monthly. Be realistic.
Work on establishing/re-establishing your credit.
4. Seek Professional Help
Making arrangements with your creditors could be difficult. If you are having trouble budgeting or overcoming debt, contact Money Management International at 800-208-2227
Content provided, with permission, from Money Management International of Massachusetts (MMI of Mass)
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This content was last modified on: 03/16/2011