Why Debt-Free Life is Attractive

Every consumer has debt. No one likes to be in debt, but it is a fact of life throughout most stages of your financial career. Some are in debt the day they die of old age. How much better life would be if you had the financial freedom of being debt-free as soon as possible and to remain debt-free throughout the remainder of your lifetime. You have the freedom to use your disposable income to enjoy a better lifestyle and to accumulate savings and investments for an early and comfortable retirement How to find the most suitable route to a debt-free financial career will depend upon your circumstances, the steadfastness of your goal to be debt-free, and your ability to practice self-discipline.

The Routes

1. The first step to becoming debt-free is to pay off all high interest bad debt, that is, debt for which there are no assets. The most prevalent debt of this type is from credit cards. Americans seem to have this need for the power of plastic, but they use this plastic to engage in deficit spending, purchasing goods and services that are truly beyond their means. To become debt free, this practice has to stop immediately with a decision that only a dire emergency for which there is not cash will ever be put on a credit card again. One by one, credit card debt must be eliminated, only one card being retained for emergency.
2. Once the bad debt is eliminated, put an eye on eliminating the debt for which there is collateral. This debt would include car and mortgage payments. If there is other debt for furniture and appliances, etc., these should be paid first.
3. Begin,as soon as possible, a regular and sequential savings and investment plan. Without doing this, emergency expenses that crop up will have to be put on credit. As well, the interest and dividend income from these savings and investments can add to monthly income and allow a nicer lifestyle.
4. Debt Consolidation: If you are in a situation of late or missed payments, you need to take action to get rid of your debt as quickly as possible. There are terrible fees and interest rate hikes when you get into this situation. You will need to contact creditors, or employ the services of a professional who will do so, to reduce the total amount of debt by as much as possible. Once the new amounts are negotiated (and these can be as much as 50%), you will need to make arrangements for new payment amounts to the original creditors or secure a consolidation loan to pay off all original creditors.
5. Bankruptcy should be considered as a last resort, but can be a method of gaining a fresh start, with debt wiped out or significantly reduced. This action will affect your financial profile for a 10-year period, but the further you get away from the bankruptcy, the more credit-worthy you will become. The other caveat of this action is that you must commit to a major change in spending habits, so that you do not purchase anything for which you do not have cash.

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