For some consumers, getting out of debt simply means tightening the household budget and being more stringent on new purchases. For others, the challenge of getting out of debt can be more daunting. In either case, the best self-help plan for relieving debt is planning and discipline.
The first step to relieving debt is to find out where you are. Make an income list and an expense list. On the income statement, list all of your income. On the expense statement, list all of your current bills. Once this is complete, subtract the expenses from the income and you will have your disposable income. For some consumers, this may be a negative number, which means you are paying out more than you are bringing in.
In order to maintain a clean credit report and keep a high credit score it is imperative that you pay all of your bills on time. This is simple common sense, but what if you do not have enough money to pay all of your bills on time? What can you do?
When expenses outrun income you have two viable options. One is to increase your income; the other is to decrease the amount of cash needed to pay those bills.
There are many ways an individual or family can find fast cash by simply cutting back on what is spent per week on household items and living expenses. For example, rather than buying lunch during the work week, pack a lunch. Rather than going to the theater, rent a movie and watch it at home. You may find that getting a part time job for a while is a good way to increase your income. The key is to monitor your savings and protect those savings so that you have this cash available at the end of the month.
In order to decrease the amount of cash needed to pay your bills you may want to consider a consolidation loan on your credit cards. A consolidation loan allows you to bundle up several outstanding loans (all of which require an individual payment) and make one single payment, usually at a slightly lower interest rate. The total of the one payment under a consolidation loan is often substantially lower than the total of the multiple payments you were making before.
If you have any disposable income available for use after paying your bills, you may want to find the loan that has the lowest outstanding balance and begin making double payments on that one particular account. Once this account is paid, you can use the money that you would have been using to pay this account to help make additional payments on the next lowest balance account.
With some planning and discipline, you can begin to pay down your debt obligations and begin to see some real progress in your financial status. The important issues during your self-help in debt reduction are patience and diligence.
Financial calculators are available in abundance on the Internet. They are available for use online and as free downloads. These handy little tools are offered primarily to calculate the monthly payments and interest rates for mortgages and credit cards, but many can also be used to calculate other types of loans for automobiles or personal use. There are also net worth calculators that allow you to see how your wealth is progressing. In addition to these software calculators, there are also a number of hand-held, programmable financial calculators on the market offered by companies such as Hewlett-Packard. These, however, are a bit complicated to use without carefully studying the instruction manuals and a good basic understanding of mathematics.
Use financial calculators to reduce what you now owe, what you will owe and which options will save you the most money
Financial calculators are excellent for comparing the costs and lengths of loans when you are considering refinancing existing loans, or for determining which offer is the best bet in a debt consolidation loan. They are also advantageous when comparing mortgage offers and these can be instrumental in saving you tens of thousands of dollars over a mortgage's term. While these are the most popular applications, financial calculators can be used for determining almost anything including:
General loan calculations- Payments on a fully-amortized loan; time to amortize; interest rates; current value on a payment series; balloon payment due; remaining loan balance; and whether or not to pay ?extra? points for a lower mortgage rate
Auto financing- Determining basic loan rates, terms and monthly payments; Low APR vs. cash back; Basic lease and leasing vs. buying.
Banking & personal finance- Analysis of CDs; Paying-down a debt or investing more; current cash flow information; debt consolidation vs. individual payments and time to pay off credit card debt.
Insurance- Amount of disability income insurance needed; tax benefits from an annuity; what are long-term care insurance needs; how much life insurance is needed and how long life insurance proceeds will last.
College education- cost/year and total cost; advantages of college savings plans; what loan payments will be; reducing or foregoing expenses and how much am I spending.
Family & home- Renting vs. buying a home; cash required for emergencies; analyzing retirement plans; rate of return on real estate investments; future value of a 401K and what a job bonus will net after taxes.
Taxes- Determining the affect of taxes and inflation on returns; whether or not to exercise stock options; income from a savings plan; tax advantages from annuities and tax savings from a mortgage.
Retirement- Estimating income from social security; how much money to set aside for retirement; whether or not to convert to a Roth IRA; how much to contribute to an IRA and analysis of self employment retirement plan contributions.
While detailed explanations of how to use each calculator is beyond the scope of this article, one thing is clear: These simple calculators can provide you with a wide range of financial information that will enable you to make the best short and long-term decisions. In addition, they have very-real value in helping you to reduce debt by making the financial benefits of alternative solutions clear and thus simplifying important decisions.
Very detailed information on individual calculators, free downloads and how-to-use-them information is readily available on the Internet by searching under ?financial calculators?.
Both Peter Kenny & Shirley Bullington are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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