As Americans, we have
adopted a lifestyle that doesn't encourage saving and almost glamorizes debt.
It has become easier than ever to find money for life's little emergencies.
While everyone has an emergency from time to time, the companies that offer
financing for these situations often start a vicious cycle of debt. Once you
have maxed out your credit cards and spent that money you were saving, this is
the inevitable time that you will have your car break down, or you will need to
get to the doctor's office... the list of emergencies can be endless.
Many people have
entered the payday loan centers, where it seems like a quick fix until payday
to borrow a few hundred dollars for a seemingly small amount. The 17% doesn't
seem like a big price to pay to get you out of a bind, but what many of these
people don't realize is that totals up to a staggering 400% in a year! This can
quickly escalate into a burden for the middle and lower income families who use
these services. If you want to know how to get out of this payday loan debt,
the answers are simple - even though sometimes changing the behavior isn't.
The first thing you
have to do is to stop borrowing money. The deeper you dig the hole, the harder
it is going to be to fill it back up. Once you have stopped borrowing, you may
realize that you don't have it in your budget to pay everyone back. Don't
stress about this too long. Instead, make a plan. Once you are unable to make
these payments, the phone calls will start from your creditors. Stand your
ground, and pay the essential things first (house, electric and water). You may
have to make substantial lifestyle changes to pay everything back (such as not
eating out), but the end result will be freedom.
Once you have
committed to get out of your payday loan debt, put a set amount of money aside
for emergencies. This will help you to avoid going back to borrowing, thus
defeating your plan of becoming debt free. Some people recommend $1000, and
this is a good starting point. Don't make it easily accessible, and get it done
as quickly as possible. Sell items you don't need, get a second job, or find
creative ways to generate this revenue. Once you know you can fix the car if it
breaks, it makes it much easier to attack the advance debt.
Make a list of all
monies owed, as well as recurring payments. Basically, you are making a
long-term budget. So many people don't actually do this, and that is how they
have ended up in debt. If you have the ability to roll all the smaller debts
into one payment, that's fine but not necessary. Know what your smallest
payments are, and eek out as much money as you can to pay that smallest debt
off. Once you have that smallest debt paid, start applying that payment to your
next largest payment. This is known as "snowballing" debt. Throw any
extra money you can find at the debt so that the interest stops once it's paid
off. Keep a list so you can see how much you have paid off. You might be
amazed.
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