Blogging Away Debt Our Journeys to a Debt-Free Life

by Tricia

There was an interesting comment left by Shay from Australia:

I am always amazed by the freedom of credit given in america…I live in Australia. I have a pretty clear credit history except for one little debt of $699 that was paid nearly 3 years ago. This little debt has caused me no end of trouble in me trying to apply for finance. I am not eligble for personal loans, not eliglble for credit cards let alone a home loan or anything else. Even when I did have a credit card I used it once to show I can use it and pay it off (all in 3 hours LOL) then I cut it up – that doesn’t count…Only what I didn’t pay once because I got into the argument with the telphone company over it…..

One thing I have learned from this blog and several others it seems to me credit is handed out pretty freely in America. Am I wrong? I would love to hear more on this.

Shay, I can’t speak for other countries, but I do feel that credit is handed out pretty freely in America. When I signed up for my first credit card, I was an 18 year-old college freshman. A little while later I had a credit card with a $500 limit. Over the years, my credit limit increased and it ended up higher than my annual income. Even today, our credit limit is higher than our income. It doesn’t add up in my mind.

Before I started blogging about our debt, I thought that we were pretty alone with the debt hole we got ourselves into. Today, it’s a different story. I can’t believe how widespread of a problem debt is. While I don’t usually view the credit card companies as the enemy (I do believe you can use them for “good”), I do think they sometimes give people enough rope to really do some damage. Every time we maxed out our cards, they raised our credit limit so we could charge some more.

It would be interesting to hear everyone’s thoughts on America’s debt problem and whether you think America gives credit too freely. After reading Shay’s comment, if we lived in Australia…it sounds like our financial situation would have taken a very different course.

by Tricia

Today I have a guest post from Debbie Dragon. She’s a writer for DestroyDebt.com, a website dedicated to helping people find their way out of debt and into a more rewarding, financially secure future. The website also runs one of the forums that I mentioned in the list of debt forums that I have found.

Most people make New Year’s resolutions, and the majority of people probably include “lose weight” as one of their top resolution goals. But what about your finances? Isn’t the New Year a good time to resolve to make yourself more financially-fit, as well?

If you’ve got credit cards, loans, and other sources of debt, it can often leave you feeling discouraged and wondering how you could ever pay it all off. Becoming debt-free is a possibility, and there is no time like the present to make it happen. Here’s what you can do to get started to a financially-fit you in 2008:

Know What You Earn

I’m not talking about what you earn on paper for your annual salary; I’m talking about the amount you actually see in your paycheck after your deductions are taken out. How much do you make each month after you’ve paid your health insurance, work loans, taxes and whatever else is taken from your pay before you even see it?

Know What You Owe

Take an hour or two and make yourself a detailed list. Write down everything you pay each month, the minimum payment due, the date it’s due, how much you owe to be free and clear of that debt, and what the interest rate is. For expenses you don’t pay monthly, estimate the amount you do pay (quarterly or annually) and then break it down into a monthly amount. For example, if you average about $1200 a year on car maintenance and repairs, include $100 per month for this expense.

Once you have your list of everything you owe, look at it again. Did you forget to include your gasoline? Did you include your daily coffee at Starbucks or the newspaper you grab on your way to work? If these are things you pay for more often than not, you must include them as your living expenses (unless you are going to change your habits and stop buying these non-essentials immediately- which is a good idea if you’re looking to get out of debt!)

Create Your Debt Repayment Plan

Going someplace you’ve never been is difficult without a map or directions of some sort; getting to a debt-free status is just as difficult without a real plan. Your debt repayment plan is your roadmap out of debt and into a financially-fit lifestyle.

Determine what areas of your “what you owe” list can be eliminated or reduced. Do you really need to pay $102 a month for cable tv, just so you can have high definition or 234 channels? Can you make coffee at home and skip the daily stop at your local coffee shop, and bring your lunch from home instead of getting fast food? These are all areas that seem like such an insignificant amount when you’re buying it; but over a year’s time the amounts add up and could go a long way to getting you out of debt if you eliminated and reduced these non-essentials.

Once you’ve narrowed your list down to the essential expenses, decide how much you can comfortably afford to pay off on each account, each month. The Snowball Method is highly recommended, as each time you pay off an account you will have that much more money to apply to the next account on the list, and as your payments snowball bigger, the amount of debt you owe is decreasing. Another method many financial advisors will recommend is paying off accounts with higher interest first.

Regardless of your method of choice, it’s important that you create a plan on PAPER, and hold yourself accountable. Just as a weight loss resolution requires determination, motivation, and discipline- the resolution to become more financially-fit requires the same.

Thanks, Debbie for the guest article! 🙂