Posts Tagged ‘ debt payoff ’

Getting Out of Debt: Paydown Strategies

Guest Post

Trying to get out of debt can be a difficult task. Due to interest, it seems as though debt keeps on growing. It can be hard to pay off your debt — especially if you only make minimum payments. In order to make headway, it is vital that you start to making more than the minimum payment on the debt. Here are some ways that you can find room in your budget to help reduce your debt:

Identify — and Cut — the Financial Waste in Your Monthly Budget

The first thing to do is figure out where you can cut back on your spending. There are some estimates that each household wastes up to 15% of its income each month. Think about that. If you make $4,000 a month, that means that you could be wasting up to $600 each month. Consider how much headway you could make with your debt if you applied even half that on top of a minimum payment.
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Payoff Your Credit Cards – But Set the Stage FIRST

It’s easier when you take care of a few things first

By Kevin M

It’s been said that the best way to accomplish a big project is to break it into a series of smaller ones. Paying off credit cards can be as big a project as we can imagine, based on the size of the debt that needs to be paid off.

Often it’s the size of the debt itself that presents the biggest obstacle to even getting started. While it may not be too difficult to payoff $10,000 in credit card debt going from a standing start, a balance of $50,000 will require marshalling all of our efforts and resources.

It’s important to realize that paying off credit cards isn’t just about discipline. A huge part of the project is emotional and you’ll have to do it in such a way that you’re rewarding your efforts by reaching crucial milestones along the way. Take it in stages, stack the deck in your favor, and the whole process will be less painful.

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Save for Retirement Now or Payoff Your Mortgage First?

By Kevin M

Two of the most important components of retirement planning are a generous retirement savings plan and a mortgage free home. But if limited resources force you to make a choice, which goal should get the lion’s share of your extra income?

There are three basic choices:

1) Emphasize retirement and let the mortgage slowly amortize itself into extinction
2) Throw all extra funds at the mortgage, and once it’s paid you’ll have even more money to put into retirement
3) A hybrid plan where you try to do both at the same time

This isn’t a good solution-bad solution debate. There are plusses and minuses no matter which way you go, and fortunately all three can get us where we need to go. Which one we choose will depend largely on individual circumstances and preferences.

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Should You Use Retirement Savings to Pay Off Debt?

By Kevin M

Despite the near sacrosanct status of tax sheltered retirement accounts, there are situations in which liquidation makes abundant sense. From the outset, let me say that I don’t advocate raiding retirement accounts except under extreme circumstances.

When to consider tapping retirement savings

My personal opinion is that if survival is at stake tapping retirement savings MUST be on the table. Under certain circumstances it becomes beyond absurd to allow your financial situation to collapse while protecting retirement savings. Retirement savings are, after all, a financial tool and not some sort of gold-plated legacy to be shielded at all costs.

Under what circumstances should we seriously consider withdrawal?

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Build Savings or Payoff Debt – Which Comes First?

Newsflash: You can’t get out of debt until you stop being broke!

By Kevin M

Some argue that if you’re in debt the priority needs to be to payoff your debts before attempting to build a savings account. Many call for the establishment of a small emergency fund—typically $1000—to handle contingencies, and then to pour all extra funds into the pay down and eventual payoff of debt. Only when your debts are paid will you have the cash flow to truly build substantial savings.

While there is some merit to that advice, I believe it fails to address the basic reason a person might get into debt in the first place: a lack of savings, forcing the use of credit as a savings substitute.

Until that cycle is broken, it’s doubtful you’ll ever payoff your debts or accumulate substantial savings. Life has a way of throwing contingency after contingency at us and unless we’re fully prepared to deal with that reality, getting out of debt is little more than a fantasy.

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