How do I Get out of debt | Columbus, OH

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How do I Get out of debt

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Getting out of debt – the smart way.

  • “Save 10% of your pay check.”
  • “Put away for the rainy day.”
  • “Be the ant, not the grasshopper.”
  • “Never a borrower or a lender be.”

How do I Get out of debt!

Let’s be real – some of the advice our parents gave us as well… the kind of advice parents gives us (except the last one, that’s Shakespeare). The simple truth is many people get into debt because circumstances overwhelm their financial capabilities— disease, death or divorce can often be the tipping point into debt for many people. However, it’s not a trap from which there is no escape. You can become debt-free, and avoid the many common mistakes people getting out of debt make. Mistakes such as….

#1 Thinking that consolidating all their debt will erase their debt

A common mistake that some make is to obtain a line of credit and use that to pay down their credit card debt. And then what can happen is because they haven’t learned to manage their money without credit, people often ring up the same amount of debt as before on their credit card. And now they have both credit card debt and line of credit/loan debt to contend with, effectively making their situation doubly worse.

#2 Concentrating on their highest interest debt first

This, to be fair, may not always be a mistake. Logically, it makes sense to pay down your higher debts first. But if you have multiple debts, it can be more psychologically satisfying to pay off a debt – even a smaller one with a lower interest rate to prove to yourself that it can be done. Note that if you have student loans or other debt where the interest can in some circumstances have tax benefits, you should weigh your options first.

#3 Trusting the wrong people

Like weight loss or accumulating wealth, there are few quick-fixes in life and debt relief programs are no exception. The first thing is to realize that debt-relief can be a long process that lasts years, not months. The second is to check to see the credentials and history of the firm offering these services. Ensure they are properly licensed, check for consumer complaints, and think carefully before signing any contracts for their services. Universities, government services, and credit unions are just a few of the places that may be able to offer to you a quality referral.

#4 Closing accounts once you’ve paid off the debt

It seems like an obvious choice, doesn’t it? If you’ve paid off a credit card, you should immediately close that account to prevent yourself from getting back into a bad situation. However, doing so can upset your credit score systems in that they look not only at your current debt load but the percentage of available credit you have available. In a simple example, if you have two credit cards with a limit of $5,000 each, and a balance of $1,000 on one just card (and zero balance on the other) your utilization rate is just  10% ($1000 out of a possible $10,000).  But if you close that zero-balance card, your utilization rate is now 20% ($1,000 out of a possible $5,000). It is more useful to your credit score to have unused credit, somewhat paradoxically.

#5 Failing to accept bankruptcy as an option

At some point, it doesn’t serve society when individuals are so overburdened with debt that they can not provide for themselves and their families – which in turn can put a tremendous amount of stress on a marriage and then ultimately the government if they have to provide for these people. In fact, the first modern Bankruptcy Act in America (“the Nelson Act”) was initially entered into force in 1898 – even in pre-industrial America, it was accepted that filing bankruptcy can ultimately lead to a better outcome for society. It is not something to be entered into lightly, and our law firm is here to guide you along the way and discuss the pros and cons of what’s involved. It’s a highly personal matter, and having some outside counsel adds great perspective.

Contact Sheppard Law Offices Today

Our office in Columbus Ohio is here to help you with concerns over bankruptcy, debt management, rebuilding credit and other financial and debt issues. Come in and speak with us in person, or over the phone at your convenience at (877) 505-9455. We’re here to listen, advise and most of all, help.
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