Can I Really Be Debt Free?

If you're struggling with debt, trust me you are not alone. Being debt-free takes dedication and a little knowledge. Follow these steps I learned from "credit rehab" to get back on the path to being debt free.

Separate your debt:
Unless you hit the lottery, some debt is inescapable. Your "okay debt" has an interest rate well under 10%. In the best case scenario, the thing you bought with borrowed funds will appreciate in value (think mortgage). "Bad debt" is everything else (think credit card).

Pay by your own rules:
You know that the "minimum amount due" is cleverly calculated to keep paying insanely for most of your adult life. A $4,500 balance on a card with an 11% APR will take 44 years to pay off, even if you don't put another dime on the card. You have to be smart and pay by your own rules!

Get personal with your debt:
Identify your one major credit card with the lowest annual interest rate. Your other cards no longer mean anything to you - kill them. Cut them up and throw them away forever. Promise yourself that you will only use the one card left intact for emergencies.

Be a heavy hitter:
Pick a bill from any account charging you more than 14% interest. Call them up and ask to have your rate lowered to at least 11%. Tell them that you'd really like to stay with them out of customer loyalty but that you've received offers for a much lower rate else where. They will jerk you around a bit and make you feel slightly uncomfortable, but be firm. Remember that, to them, you're both a customer and a profit center and you also stand to save a ton. Studies show that people do have success with this technique everyday.

Repeat and re-repeat:
Repetition will be your key to success. Pay the minimum amount due - on time, always -- on all accounts except the one with the highest rate. Send every extra dollar, to every penny you find on the sidewalk, to the card with the highest interest rate. Pay well beyond the minimum your lender hopes you'll pay from now until the end of time. Repeat, repeat, repeat, until you've washed that debt clean and clear.

Be aggressive with yourself:
Be aggressive in paying down your debts, but don't get so ambitious that you risk missing minimum payments on secured credit accounts -- mortgage, car, etc. (Secured means that if you miss enough payments, the bank can show up and take your stuff.) Have a small emergency stash of cash to help cover those budget crisis situations. Sticking to this plan requires a lot of willpower over a long period of time. Be patient and be firm with yourself. Resist the urge to pull those credit cards out of your wallet the next time you "just have to have" something. It will be worth it in the long run!

Resolve:
"If you can't pay for it today, then you can't afford it. In a household built for two this goes doubly." This is a motto that I now live by. Sound harsh? It is, but it's true! Resolve to spend less money than you make on a consistent basis. By making just a few small sacrifices you can save a nice chunk of change in just a few months. Now you are out of debt and saving for your future.