Eliminate Bad Debts
There are some debts that are terrible, and some that actually result in profit. In the case of the latter, you might borrow money to start a business which in turn could generate a lot more than the loan including interest fees. In this case, debt allowed you to reach a higher net worth. But there are also the cases where paying back a loan results in an overall payment that is much more than the value of what you got the loan for in the first place. An example of this is credit card debt. This is one of the worst kinds of debt to have. The interest rates are ridiculously high. If you pay just the minimum, you will ultimately pay a lot more than the value of your purchase, and it could even take many years to completely pay for it.
If you suffer from this kind of debt, then you need to start attacking this problem now. You must start paying more than the minimum. So assess how bad the damage is. See how much you owe, and find out the interest rate(s). Do some calculations. Sit down with a bank representative if necessary, and find out how much you need to start paying in order to get out of the hole, in the fastest timeframe that you can manage. Use a portion of the amount you decided to pay yourself with first (ie. of the amount you decided to put towards pension or 401k) to pay off your credit cards. Eliminating credit card debt must be your priority. Consider this an obstacle in your path to millionaire status. It is something you must overcome, but it can be done.
Once you’ve arrived at a plan for eradicating credit card debt, automate it. Get your bank to automatically deduct this payment each month. This is one payment you don’t want to be late on.
+ Determine your debts that are not expected to result in profit
+ Rank them in order of interest rate (higher the interest rate=more costly)
+ Tackle the most costly one first
+ Stop incurring credit card debt (donâ€™t carry it around, donâ€™t use it)
+ Renegotiate interest rates if possible
+ Use a portion of your Pay Yourself First funds to pay off debt (50% recommended)
- Buy A Home?
- Pay Yourself First!
- Give Back To The Community
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