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Paying Off Debt |
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Submitted by Rosemary Lane
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The Debt I refer to here is Consumer Debt that is linked to the acquisition of lifestyle comforts, whims or desires.
This type of debt can really leave you with economic insecurity and a limited financial future is best avoided. Entering into debt for business reasons or to accumulate assets is often necessary and indeed wise as long as it is part of a well thought out Business Plan or Investment Strategy.
How start Paying off debt.
If you have any non-mortgage debt, loans, credit card debt etc. take 10% of your income and use it as an extra resource towards paying off debt. Get those debts paid down as quickly as possible because each day you have them they cost you more and more money, unfortunately this the wonderful principle of compound interest working against you.
Paying off debt could be the best investment you ever make.
Although you are paying off debt, if you look at it another way you are really making an investment. It may also prove to be the best investment you ever make.
For example:
If you have credit card debt and the interest rate is 18% per annum and if you pay it off, you are saving yourself having to pay out that extra 18%; which is just the same as getting an exceptional return of 18% on an investment.
Frightening non-monitory interest.
I have noticed that there is a lot of advice about paying off debt with the high interest first and even some advocating the paying off debt with lowest interest first. I suggest that both suggestions are flawed.
The debt with the highest interest has not necessarily got a percentage after it. What you must pay off is the debt that can cause you the most harm if it remains unpaid and that could extract a frightening non-monitory interest.
If you do not pay your rent or mortgage you could be evicted from your home.
Moneylenders can, via County Court Judgements apply for an order for Bailiffs to take your possessions and sell them to recover any defaulted payments.
Prison sentences can be handed out for not paying income tax, council tax, and child support.
If you have borrowed money from less reputable sources you can be threatened with violence or worse if you fail to meet their payments.
Chester Bowles (1901-1986) said, “There can be no real individual freedom in the presence of economic insecurity”
You do not need to be a successful businessperson or entrepreneur to have a debt free lifestyle that gives you that economic security. Such financial freedom can all be attained by simply paying off debt.
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