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Reducing Your Debt

By
Real Estate Agent with (512) 786-8300

A financial channel I watch, asked millionaires what was the single most important factor to attaining wealth. The majority said not incurring large amounts of debt was the number one reason for their financial success. As with most things in life, it's sensible and simple, yet unique. Millions of Americans set a goal to pay off their credit card debt, yet few ever do. Is this one of your goal? With a lot of determination and a good plan, you can achieve the goal of taking control of your debt and credit. Here's how:

 

Get rid of the cards-

Well, don't cut all of your cards tomorrow. Credit cards offer convenience and are helpful in emergency situations for sure. Moreover, if you close accounts too quickly, it can affect your credit score. But you can certainly pay them down, not carry them and use cash or debit. Try to avoid the store credit cards (which have the worst rates), and using cards for disposable purchases such as dining out and travel.

Negotiate, Negotiate, Negotiate-

Simply call up your credit card issuers and ask for a better rate. Tell them you plan to transfer to another card unless your rate is lowered. Tell them you have other offers in the mail. Inform them that your rate is just too high for a loyal customer to pay. Tell them anything reasonable, as you have nothing to lose. Credit card rates are high, interest rates on in other instances at at historic lows (Autos and Home) and quite frankly, credit card companies have a bad perception with consumers and the government, so they might budge.

Reduce that debt-

It sounds elementary, but make a list of the cards you have. And pay as much as you can on that highest interest rates, and pay the minimum on the other cards. The additional payment on the high rate card will pay off the principal faster.

Once you get that success under your belt, use the same strategy on the others. If you have to, may off that low balance early, so you get the taste of success. Remember to keep that low interest card open for emergencies.

Debt reduction is easier said than done. And as they say, making more money never hurts the cause. But if you remember that paying off debt is a marathon, whether you run or walk, you will eventually make it.

A couple of reference articles:

13 things millionaires don't do

http://debt-free-mom.com/2007/11/20/13-things-millionaires-do-that-you-dont-do/

 

Money debt reduction planner:

http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp

 

Posted by

Scott Hayes

Austin Real Estate Agency

Extraordinary Service, For Extraordinary People

Direct: 512-786-8300

www.austinrealestateagency.com

Marilyn Boudreaux
Marilyn Boudreaux, Century 21 Bono Realty - Lake Charles, LA
Lake Charles LA Century 21 Realtor

Excellent advice Scott! My husband is a loan officer and sees LOTS of credit card debt.  Several years ago we had the credit card scissor ceremony in our house !

Jun 04, 2011 05:02 PM
Kristal Wilson
KB Home - Fontana, CA
Cause We Like 'Em New ~ New Home Specialist!

Scott ~ great analogy! I like the thought of managing debt as taking part in a marathon. Thanks for the advice as many are seeking ways to manage their financial lives.

Jun 04, 2011 05:12 PM
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond

Scott, i love to watch this 'scary debt people' on some MSNBC program where these 30 somethings just live like twice their income and don't have a clue.  What are parents teaching their kids in life- anything financial you wonder??  One thing I did with my kids is make it clear to them save & then buy...it has made a huge difference in their lives.  Our society still has a huge issue with the 'buy' scenario on credit cards..great thoughts here...

Jun 05, 2011 12:02 AM
Toni Weidman
Sailwinds Realty - Trinity, FL
20+ Years Selling Homes in New Port Richey, FL
Excellent advise; of course millionaires have an entirely different perspective but the principle works for all.
Jun 05, 2011 12:46 AM
Charles Edwards Bentonville
Coldwell Banker Harris McHaney & Faucette 479-253-3796 - Bentonville, AR
AR REALTOR, Bentonville Real Estate Agent and Broker

Scott, what a great blog. Responsible money management is a life changing experience. A friend told me years ago, 'money goes where it is treated well'. I recommend, The Millionaire Next Door and The Millionaire Mind.

Jun 05, 2011 01:46 AM
Cathy Criado
Criado Realty - San Antonio, TX
Making Real Estate Profitable

Nice post, thanks Scott!  I am finishing up Rich Dad Poor Dad.  He's a staunch advocate for cash basis purchases.

He also has a very different viewpoint regarding the Balance Sheet.  Having a business degree I had to reprogram my brain to understand there are two perspectives to BS.

Academic perspective :  Assets (A) = Liability (L) + Owner's Equity (OE).

Real life perspective:  Assets are income generators.  Liabilties are expense generators.

What about OE?  It isn't part of the equation which turns the Balance Sheet - optimal word being "balance" into an unbalanced equation.  The OCD side of me kicks in but the desire to be financially free overcomes it. 

Home ownership is a Liability, not an Asset:

Robert Kiyoseki says our home is not our biggest asset; it's a liability.  It doesn't generate income and the bigger the house the greater the expenses.   It has inspired to me to consider selling my home and buying a condo that can be rented out when I travel.  I throw this in because real estate guroos say he's against home ownership.  No, not at all. He says it's okay to buy a home so long as you recognize it as a liability. 

What say you?

Jun 05, 2011 02:12 AM
Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

NO credit card debt here :-)  Only debt I have is "good debt" mortgage/investment mortgage which I hope to pay off some day :-)

Jun 05, 2011 03:41 AM
Charita Cadenhead
eXp Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

Scott I am definitely on a mission and while paying off the highest interest rate is the best way, I sometimes pay off those with the lowest balances first.  This way I get a greater and faster sense of accomplishment and then I switch to the tackling the highest interest rate.

Jun 05, 2011 05:15 AM
Allen 2222
Austin, TX

Yes yes yes! I'm on a mission, too - and all of my debt is business-related. Never again!

Jun 05, 2011 08:02 AM
Doug Rogers
RE/MAX Coastal Properties - Destin, FL
Your Real Estate Resource!

Very smart! Forward this to my cousin in Austin!

Jun 05, 2011 09:57 AM
Tish Lloyd
BlueCoast Realty Corporation - Wilmington, NC
Broker - Wilmington NC and Surrounding Beaches

Scott ~  Had to lean, even if I am late to the party.  This is excellent advice, especially in these lean times.

Jun 05, 2011 01:23 PM
Christine Pappas - REALTOR®
eXp Realty - Willoughby, OH
When You’re Ready To Move, I’m Ready To Help

Good post!  One of the best books I read on the subject is the Richest Man in Babylon.  Small book, but powerful advice.  

Thank you for talking about this!

Jun 06, 2011 07:24 AM
Doug Anderson
Tucker Associates Real Estate Services - Danville, CA
Bay Area Real Estate Views

You offer some very sage wisdom here Scott which is especially useful with the downturn we are currently coming out of.

Jun 06, 2011 04:13 PM
Joshua Harley
Fathom Realty - Plano, TX
CEO, Tech Geek, Innovator, Disruptor, US Marine

I also like the Financial Peace University information from Dave Ramsey - great info!

Jun 09, 2011 08:03 AM