(photo courtesy of flickr.com)

I just received a phone call with a number I did not recognize.  Naturally, I let it go to my voice mail. (After all, who wants to talk to a stranger?) The caller left a message,  and out of sheer curiosity,  I listened to it. The message went something like this: “We can help you pay down your credit card debt . . . call for more information . . . this is the last courtesy call I can give you. . .” I began to wonder: Is that about the credit card debt I haven’t paid on for the last five years, or is that another marketing ploy designed to prevent me from finding debt relief?

Step One: Stop Overspending!

Debt relief starts with one simple step. It’s so simple, in fact, that anyone can do it: Ignore the marketing attempts of big business and stop overspending. I told you it was simple!  But it’s not easy, because you must train yourself to bargain shop, as well as live simply. Deprivation, however, is not allowed. You can treat yourself to your favorite things every so often, but if you make it a habit, your spending can get out of control again very quickly, and you may never find the debt relief you crave.

Step Two: Live Simply

If you had to choose between having a large slice of pie today and never being able to have another slice of pie again, or having one bite of pie every day for the rest of your life, which would you choose? What if you had to choose between renting a tiny apartment for five years and then buying the house of your dreams with little or no debt, or buying that dream house now and losing more money?

As obvious as the best choices in these scenarios may seem, for many people they aren’t easy decisions to make. In fact, the average person can be faced with choices that obvious on a daily basis and make the wrong choice every time. (Well, I can, anyway.) Case in point: choose between putting that very expensive coat on my credit card now, or wait until I have saved up enough cash to buy it in six months.  Many people will choose the credit card. The second step to debt relief, therefore, is to live simply now so that you can have what you want later, without sinking further into debt.

Step Three: Pay Down Debts

The third step to becoming debt free is an obvious one: Pay down your debts on a consistent basis. What if you do not have enough money to live on, let alone pay down debts? Even in this economy, you can find something to do to earn extra money. Mowing lawns, shoveling snow, or cleaning houses for others can help you earn money to put towards paying down your debts. Also, take a few minutes to think about where your money goes every month.  You’ll come up with a number of ways to reduce your expenses and free up extra money to pay off your debts.

Step Four: Avoid New Debts

Once you’ve eliminated your debt, how are you going to stay debt free? What would happen if you suddenly lost your income?  Would you be able to pay your daily expenses? The best thing you can do to stay debt free is to begin putting money into an emergency fund. Experts say that you should have at least 8 months of living expenses set aside for layoffs, illnesses, or other emergencies.

The Bottom Line

Finding debt relief can be a long process, but it begins with that first simple step. When you finally decide to make the effort it takes to get rid of debt, the relief you’ll find will be more valuable than anything you can think of buying. It takes discipline, focus, and a strong commitment to improving the quality of your life. Take control of your spending today and you really can have a debt-free tomorrow!

(Photo courtesy of flickr.com)

Most recent college graduates focus on debt relief as they move into the workplace. Gone are the days of accumulating credit later in life and almost every college graduate has some type of debt to deal with.

Whether it’s student loans, car loans, or credit cards, students need to focus on their credit-building plans. With Visa, MasterCard, and Discover all catering to college students as their future market, students are inundated with offers of special deals to secure their business for many years to come.

Paying down debt

The first thing all graduates should focus on is getting out from under unnecessary debt. Sure, that credit card deal sounds great, but the bottom line is that credit card companies are out to make money. Whether that comes in the form of fees, charges, or penalties, they are set up to reap as much benefit from each customer’s purchases as they can. Young adults need to pay down debt as soon as possible.

Ways to manage

There are a wide variety of ways to pay down debt. Smaller apartments, living with parents for a longer period of time, or getting a roommate can maximize funds for paying down debt. Using public transportation rather than buying a car immediately after graduation may be another solution. There are many different ways to cut back on living expenses.

Another area to look at is credit card balances. If graduates find they have large credit card balances, they can look into switching to lower-interest cards. Existing balances can be transferred to these cards and resulting monthly savings can be applied to paying down debt. Again, in today’s economy, debt relief should be a priority for every student attempting to manage a budget.

Student loans

For qualifying graduates, student loan payments can be reduced under many different programs. The Federal Direct Consolidation Loan program can give information on what can be done to change payments. Many students qualify for these types of student loan repayment programs, and the monthly savings can be significant. The programs can lengthen loan terms, reduce payments, and in some cases, even forgive portions of loan balances.

Insurance

Graduates should pay attention to insurance needs, also. Health insurance is important. Uninsured medical expenses due to illness or accident can cause long-term financial disasters. Many employers offer health insurance, but graduates should be sure to understand the terms of their coverage; and if the coverage is inadequate, they should attempt to find better coverage on their own by calling major insurers for their location.

Graduates should also consider life and disability insurance. Although life insurance is most logical for graduates with dependents, disability insurance is important for everyone. Disability insurance will replace a portion of a worker’s income should he or she be unable to work for an extended period of time due to illness or injury. If an employer doesn’t offer this type of insurance, workers should call companies to compare rates.

A cash reserve

Graduates need to understand the importance of saving. Putting money away, in addition to working on debt relief, can make their financial futures secure. The traditional rule of thumb has been to maintain between three and six months of normal living expenses in savings. But given the current recession, six to nine months of expenses is a more realistic amount to cover emergencies and possible periods of unemployment or income reduction.