Get Out of Debt Slowly

Having worked in lending and as a Mortgage Underwriter, I can tell you that there is no easy way to "Get out of Debt." I have viewed thousands of credit reports for varied types of customers and it is evident that we are all very different in the way we view our financial status and credit as well as the way we view our life.

You can find that some people realize how important "not" using credit is and then you have those who do not think twice about charging anything from toothpaste to a house makeover. I have found it to be that some, but not all younger married adults, do not think about tomorrow, but only being able to get what they want today. It seems that the young adults who are not married do not over indulge in borrowering money as much as the married. I am assuming this is due to it being a twosome instead of just one and each thinking possibly differently about the issue of how much credit is too much. There are always exceptions to all behaviors. Sometimes it is due to the fact that they have not developed a credit history so that it is easy to get a loan but as a general rule, my observation is that they think twice about charging on credit cards and making loans.

Being a conserative credit user is a sure way to protect your ability to stay in charge of your finances and not have a need for an "Instant Cure." Why? Because an "Instant Cure" does not exist.

Most of us now know since the economy has hit us hard, that charging is not the best policy and we definitely know that getting in over our head in debt is not a wise thing to do. After the mortgage meltdown, we all know there will probably never be a way to get a mortgage loan with a debt to income ratio of 50 percent again; meaning your monthly debts divided by your monthly income is a ratio of 50 percent. What happened is when this crisis hit, so many people were already overloaded with debt plus a newer home with an ARM (adjustable rate mortgage) loan that started to adjust to higher payments when they were already bogged down.

A lot of people are in the situation of having more going out than is coming in because they have had their charge accounts for years. They pay them down and charge them up again, back and forth and then hard times hit and they are in a financial crisis.

They have heard that they might be able to consolidate their debts by refinancing their home. Here is my perception about this:

• If you want to pay off your debts by refinancing your home; what are you to do should something worse come into your life and you might need the equity you have built up in your home, much worse then?
• Just how long have you had your home? If you have only had your home for a few years, you have been paying more interest than you have principal. If you have a 100% loan, you equity is not going to be sufficient, more than likely. If you paid down 20%, you possibly have an option, as long as your value has not declined.
• If you could get rid of some pleasure you think you must have which cost you money each month, would you? This pleasure could be something you could deny yourself for the time being and pay this amount of money with your minimum payments on your credit cards or car note or installment loan and pay it off quicker.
• Adding debts back to in your housing is something that can be done if you have had your home for a longer period of time and your credit is good. This will keep the mortgage companies and banks in business. But, remember unless you lower the term of your loan to say 15, 10 or 25 years, you are starting over (if you had a 30 yr loan).
• You home is your largest debt and other things to think about also are; how long do you intend to keep your home?
• Yes, you can deduct the interest on your home loan on your tax returns. It is a great investment but the next thing you need to think about is your age. The future..no, we are advised not to think about tomorrow too much but one must plan for retirement at some point. From my perspective it is wiser to begin early in your life not in the last 10 years. You do not want a large housing payment unless you have adequate retirement funds so that this payment is not a burden during your retirement years.
• As we have all seen within the past 2 to 3 years, anything can happen and jobs are lost and then we have a payment that is almost impossible to pay.
• Always think twice before consolidating your bills into your home loan.

• Forget about cable TV
• Stop ordering the movies
• Stop going out to eat twice weekly
• Cook your meals, instead of ordering from the best place in town, you can save money
• Do you really need three cars
• Learn how to entertain your family at home or by visiting family
• Start saying no to the kids when they are insistent upon having that new outfit
• Learn how to be conserative; it will not kill you
• You do not have to live like the Jones

Start by making a budget and taking a step by paying off one account at a time with larger than normal payments; a curtailment to the principal of the account means you will pay less interest with each principal payment as you are paying interest on the remaining balance. Tear up your credit cards and do not charge. When you think about charging something or wanting something you can do without; think about how good you would feel if you had no debts and money in the Bank.

You must do this like you would anything else. Get a mindset that you are going to live frugel and pay off your debts as quickly as possible in the safest way. It is like going on a diet, making yourself exercise, going to Church, changing jobs. You must decide this is what is best for you and your family and to live healthy, wealthy and wise, is to be or have minimal debt.

With the increase in living expenses, gasoline and utilities, one must decide that survival is more important than getting that new car. Stop spending...if you stop spending and put every dime into paying off your credit accounts...it is like any other achievement...it will give you purpose and make you feel elated and FREE.....