Reduce Debt The Easy Way -

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Do not settle for the minimum payments on your credit cards. Paying just $10 extra a month on a credit card, above the minimum required payment,[link widoczny dla zalogowanych], can cut your repayment term in half,[link widoczny dla zalogowanych], if not more! So, make that extra payment, however small,[link widoczny dla zalogowanych], do it monthly,[link widoczny dla zalogowanych], and take advantage of the compounding effect of snowballing your way to reduce debt.
How to reduce debt is relatively easy when you follow a few basic tricks,[link widoczny dla zalogowanych], and debt calculations,[link widoczny dla zalogowanych], to help you see when your debt load is leading to the danger zone. Debt is not bad at all if you know how to use it. You should learn how to avoid the pitfalls to stay free of stress brought about by a creeping debt.
You should be aware that creditors use budgeting guidelines in the assessment and approval of credit applications. If your debt exceeds the parameters in their recommended guidelines, then you have a higher chance of your credit applications being denied. Use the following recommended budgeting guidelines (the same ones used by Financial Institutions) to review the items in your budget:
Get the ratio of your debt and your income. You should know the importance of your debt load to your overall financial status. Your debt income ratio is the percent of your monthly take- home pay that goes to paying debts. It can be calculated by taking the total amount you needed to repay your debts each month and divide it by your net take-home pay. Remember to include only the actual amount that goes to debt repayment in the calculation.
1. Housing should take about 35% of your budget;
2. Transportation takes 20%;
3. Other expenses 20% that includes:
- Mortgage or rent, taxes, repairs, improvements, insurance,[link widoczny dla zalogowanych], and utilities;
-Monthly payments, gas,[link widoczny dla zalogowanych], oil,[link widoczny dla zalogowanych], repairs,[link widoczny dla zalogowanych], insurance,[link widoczny dla zalogowanych], parking & public transportation;
- Food, insurance, prescriptions, doctor & dentist bills, clothing
4. Debt payment takes 15%; and
5. Investments & Savings covers about 10%.
If you were able to pay off a credit card, don’t close the account right away because if you do, you are actually negatively impacting your credit score. The reason for this negative effect is in the calculation of the Credit to Debt Ratio itself. If you pay off a credit card, you reduce your debt,[link widoczny dla zalogowanych], but, if you close the account,[link widoczny dla zalogowanych], you are also reducing the credit limit you have, and usually by a higher percentage than you are reducing your debt.