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How Do I Stay Out of Debt?

Posted By:  |  July 19, 2016  |  0 Comment(s)

Only around 20% of Americans are not in debt, or have gotten out and stayed out of debt. That means the other 80% are in some kind of debt. The debt can be broken up into 4 major categories, including: mortgage debt (44%), student loan debt (21%), automobile debt (37%), and credit card debt (39%). Only 1 in 5 Americans believe that debt is not worth entering. Many Americans believe that debt is necessary. But what about that 20%? How does they stay out of debt once they are free from it? After getting out of debt, there are a few things to do to stay out.


While many will advise against getting a credit card right after becoming debt-free, it’s a smart idea to slowly rebuild your credit score – just make sure you pay off your credit card every month. It is important to have a decent credit score since mortgage, and automobile loans determine their interest rates from it.


Follow the 30 day rule, and don’t buy something if it can’t be paid off in 30 days. After getting out of debt, try as hard a possible to never enter that rabbit hole again. Only spend money if it is physically your the bank, or wallet. Shop for items on sale, and if there is an option to save or spend, choose to save.


Prioritize what is necessary to spend money on. Make a budget, and stick to it. After getting out of debt, decide what is truly necessary to live. Small purchases add up, and it is important to track all spending. Whether keeping track means writing all purchases down in a spiral notebook, or typing them into an Excel sheet on the computer, keep purchases accountable. 


To prevent entering back into debt, set aside a little money from each paycheck for an emergency fund (a lot of people think 20% of your paycheck should be saved each month). This money can be used in the case of an unexpected emergency — like sudden medical bills, or a broken car engine. Many people who get out of debt decide to put away around 6 months of income as an emergency fund. A retirement fund is also a good thing to consider saving up for.


Though it can feel great to be debt-free, it is important to keep up good financial habits, and stay out of debt. Eliminate spending temptations as much as possible, and invest responsibly.



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  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

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