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GET DEBT OFF YOUR BACK !
When It's Raining ~
The Ideas Are Pouring
On Active Rain
Whether you are a potential home buyer, a renter or you already own your home debt is a burden you can live without.
Last year I started listening to Suzy Orman and Dave Ramsey tout the benefits of being debt free. Like many Americans today I felt debt was a necessary evil.
I was making higher than minimum payments on credit cards. My balances still did not go down significantly.
Some of the advice from hard core "debt free" devotees is a little hard to follow, at least for my lifestyle. You do not have to change ALL your habits to be successful at paying down debt.
Debt translates directly to your FICO or credit score. Your credit score dictates the cost you will pay for a mortgage or car loan. In some instances it prevents you from owning the home of your dreams. You can make a significant impact on your score by adopting new habits.
The road to changing my life came gradually. We will be writing a few articles to give you some ideas. If you want to improve your credit score and reduce your debt you may find this information valuable.
Start by reviewing your spending. Keep a log of everything you spend for an entire month.
Write down lunches, newspapers, magazines, movies, latte etc. I was astounded at how much I frittered away.
I listed all of my "necessary evil" payments. Mortgage, car payment, car insurance, cable, phone service etc. Looking at the necessary payments I could not see any wiggle room. Where will I get additional money to pay down credit card and loan balances?
I decided to investigate the cost of auto insurance. A word of caution here. Many insurance companies base your premium on your credit score. Inquires by insurance companies into your credit file can cause your FICO score to go down.
I googled all the insurance companies who do not pull a credit report. Many national firms will quote you and not base your premium on credit score.
My first call was eye opening. I was quoted by a national company a premium that was $2300.00 less annually then what I had been paying for years. The coverage was identical. Additionally by having the same insurance company write my homeowners I saved an another $500 a year.
I had just paid my annual homeowners premium so I received a $500 refund check. I was saving about $180 a month on my car insurance under the new company.
The first month I paid $680.00 on my credit card balances.
That was a nice chunk. What was nicer was seeing a balance go down significantly.
My next project was my phone bill. I need a land line and a dedicated fax line. I had unlimited free calling in the U.S. with Verizon. My bill was $90 per month. My dedicated fax line cost $32.00 a month.
I investigated Vonage. For $42.00 a month I have all the same features, 2 lines plus International free calling. A savings of $80 per month.
Two changes in my comfort zone equaled a savings of $260.00 per month that I could use to pay down debt. That's an additional $3120.00 to apply to my debt annually.
Look at your own lifestyle. What can you change? It does not have to be painful to be successful.
In subsequent articles we'll outline more finance strategy.
Find more spare change - Budget Expense
Which credit or debt to pay down first
Balance credit to maximize your score
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