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Day 9 – Controlling Debt

By JLP | February 9, 2006

Of all the personal finance issues, controlling debt is probably one of the most important. Although it’s not impossible to live life debt-free, it is difficult due to the fact that we live in a consumer-driven economy where people do not practice self-control. However, it doesn’t have to be like that. People can control debt. Here’s how:

1. Develop and stick to a budget. The only way to control debt is to control your spending. The only way to control spending is to have a budget. See how it all works together?

2. Make a vow NEVER to charge anything. Sure, we are all tempted to buy stuff when we see the famous “No Payments, No Interest for One Year!” advertisement. I have even done it myself in the past. The problem with these offers is that a lot of people buy something that they really can’t afford and then don’t make an effort to pay for it during the “free” period. Then, one year later, they still have the debt and now interest is being charged (be aware that some companies charge interest during the interest-free period but attach it after the free period is over).

3. Don’t Buy More House Than You Can Afford. I touched on this yesterday in the post about Buying a Home. Mortgage lenders are notorious for authorizing bigger loans than their clients can actually afford. I remember when my wife and I went to talk to a mortgage person when we bought our house in 1999. She asked us what price range we were looking at and we said $100,000 or so. She did some quick calculations and said, “well you guys qualify for MUCH more than that. Don’t sell yourselves short.” I was like, “hey lady, are you going to pay the note for us?” So although the Federal Housing Authority says that most people can afford to spend 29% – 41% of their gross income on housing (mortgage, taxes, and other costs), that may not be the case for you. I wouldn’t be comfortable spending that much money on a house.

4. Stay away from payday loan companies. This should be a no-brainer. If you want to go broke, get a loan from a payday company. Plain and simple.

Now, here are some articles from other bloggers on the topic of Controlling Debt:

FreeMoneyFinance:

Strategies for Dealing with Credit Card Debt

Small Steps to Take Control of Your Debt

Beware ‘Debt Elimination’ Scams

10 Steps to Freedom from Debt

It’s Your Money:

Debt Weight

The Baby Steps

Debt Payoff Plans

Money and Investing:

Reducing the Debt, the Healthy Way

Candadian Financial Stuff:

Solve the RIGHT problem

Great Canadian Debts

Do the Hard Stuff (Control Debt)

Don’t Pass it to the Other Team

PoliticalCalculations:

Paying off Your Loan

Topics: Credit, Credit Cards | 3 Comments »


3 Responses to “Day 9 – Controlling Debt”

  1. MoneyDummy Says:
    February 9th, 2006 at 12:19 pm

    On the note about payday loan companies, DH works in the adjustments department of our bank,
    and he says that that’s one of the biggest red flags they get. When they see a client
    writing checks to that type of company, they very often freeze their overdrafts immediately.

  2. Randall Wilson Says:
    February 10th, 2006 at 2:02 am

    It all comes down the addage pay yourself first. Unfortunately, most Americans now would much rather pay themselves with useless expenditures than prepare for the future.

    -Randy
    http://www.4mysales.com

  3. Minimum Wage Says:
    April 24th, 2007 at 3:41 pm

    I earn minimum wage and have student loan debt. How do you expect me to pay myself first?

Comments