How to be Debt free in one year (part 2)

Teri Ann Renee Paisley, Gleaner Online Writer

‘Borrowing from Peter to pay Paul’, is a Jamaican expression that suggests a person is borrowing from one person to pay another person a debt that he owes. I personally know of many persons who pay off one debt only to incur another and so their cycle of debt never seems to end.

As a result of their incessant borrowing, their debt has risen to such an unmanageable level that they are confused about how they should tackle the problem.

In a previous post, I had outlined some avenues that could be followed in order to reduce debt in one year.

The most important fact about debt management is that you can not just hope that the debt will go away if you don’t address it directly. It’s a good idea to start by listing all your debts including how much you owe each organization.

Although the truth might sting as you calculate how much you owe, it surely beats wandering around in ignorance. There are so many tax dodgers who wait until they are issued with court summons before they take action to try and deal with any arrears they might have incurred over a period of time.

So don’t wait for those dreaded court summons!

It is much better and cheaper to go to the organizations you owe and make arrangements to pay a minimum monthly deposit to pay off your debt. I suggest going in person to make the arrangement as it helps to put a ‘face’ with the name on the account in arrears.

When you make an agreement to pay, it is important to follow through and not pretend that the debt has been forgiven.

A number of delinquent taxpayers will often make arrangements then promptly break them, mistakenly thinking that since they had spoken to someone on the phone about the situation and made promises means that their case will not be treated with urgency.

The best piece of advice I ever received about debt management was, ‘Don’t spend more than you earn’.

Even if your credit card limit is $100,000, that does not mean you have to try and spend that amount each month especially if your salary is $60,000.

True, you may have qualified for the amount that was placed on the card but spending it in its entirety on a regular basis will deepen your debt.

Try to reduce your fixed expenses and use the difference saved each month to pay off your debt. Dropping channels from your cable plan for example or getting rid of it altogether will consistently save you money each month.

Eating home cooked meals and enjoying cheaper forms of entertainment will also increase your ability to save more money from your salary each month.

These measures call for some amount of sacrifice but it is essential that the debt cycle is disrupted. After a few months you should start seeing significant improvement in the amount of money you can save from your pay cheque each month.

Use those funds to pay lump sums especially on any loans that will incur high penalties.

If you follow these suggestions you will be debt free in a year!!

What’s your take on being debt free?

Tags: debt, savings