Debt has become a standard part of life. It comes in many forms including student loans, medical bills, auto loans, unpaid utilities, mortgages, money borrowed from friends and relatives, store credit and the most dreaded of them all, credit card debt. It’s a part of life for almost all of us, rich or poor, but it doesn’t have to be.

1. Simple Facts
Debt has become a standard part of life. It comes in many forms including student loans,
medical bills, auto loans, unpaid utilities, mortgages, money borrowed from friends and
relatives, store credit and the most dreaded of them all, credit card debt. It's a part of life for
almost all of us, rich or poor, but it doesn't have to be.
Let me start off by saying not all debt is necessarily bad. It can be very beneficial to
borrow money sometimes, if done for the right reason. For example, taking out a mortgage
to buy even a modest home will most likely cost you several hundred thousands of dollars
over the life of the loan, however you will gain equity and the house will usually appreciate
in value, making it a better option in a lot of cases than living in an apartment. Other
examples would be borrowing money for college in order to acquire a higher paying job, or
borrowing money to start a business. Other times it is just un-avoidable such as a medical
condition or loss of a job. They key is to borrow for the right reasons.
The problem is, we quite often borrow money for the wrong reasons. These include taking
out auto loans for nicer cars than we really need, not saving money to cover minor
emergencies that come up such as a major appliance breaking, and of course making
purchases with credit cards when we don't have the money to buy them.
The problem has really gotten out of control in the last few decades. The average American
household owes about $19,000 in non-mortgage debt, including about $7,500 in credit card
debt. When you compare that to the average household income of $43,500, you can see the
average American household owes 43% of their annual salary in non-mortgage debt.
As you can see, if you're in debt, you're not alone. No matter what kind of debt you have,
or how much, your life will be less stressful and more fruitful if you eliminate it. This nine-
part series will walk you through each of the necessary steps to help you eliminate your
debt. It definitely will take some work on your behalf, but if you stick with it, you can
succeed and the benefits will be well worth the work.
Reducing Your Interest
So far you have learned how wide spread of a problem debt is, the true impact it can have
on your life, and how to determine exactly how much debt you have and how much it will
actually cost you. The next step is to attempt to reduce your interest rate. There are several
ways you can accomplish this.
We'll start by looking at what are typically known as the highest-interest debt, credit cards.
Believe it or not, one of the easiest ways to do this is to simply call your credit card issuer
and ask them to reduce your rate. This sounds laughable at first, but quite often it actually
works. Credit card issuers typically charge customers much higher interest rates for the
money they loan than what they pay to borrow it from others. This leads to huge profit
margins, which means they really want to keep you as a customer, especially if you
regularly pay your bill on time. They know you have plenty of options available, and are

2. likely to switch to another credit card issuer if you feel you can get a better deal, so they're
happy to make a slightly smaller profit and keep you as a customer by lowering your rate.
If that doesn't work, a second option is to find a lower-rate credit card and roll your
balance over to it. You may be tempted to go with a card that has a 0% introductory rate.
This is probably not your best option though, unless you plan on paying off the card within
six months. What you want to look for is a card with a low permanent rate. There are
several sites available to where you can compare credit cards from multiple issuers.
There are also several broader options available for credit cards and other types of debt.
One of which is to look into refinancing any loans you have. Interest rates go up and down
over time, and it's quite possible the rate you can get now is lower than what it was at the
time you originally financed the loans.
You can also get a debt consolidation loan. You need to be careful when considering this
option though, because although there are several legitimate companies offering debt
consolidation loans, there are also several companies trying to make a quick buck at the
expense of others. I highly recommend checking out any company you consider getting a
loan through with the Better Business Bureau, especially if it's not a reputable bank you are
familiar with. In addition, once again use the amortization calculator to make sure you are
actually saving money with the loan. Just because your monthly payments are lower doesn't
mean you're saving money. $300 per month for 10 years is going to cost you more than
$500 a month for 5 years.
The last option I want to suggest is for those of you who own a home. There are actually
two options here, you can take out a second mortgage, or refinance your home for its
current value and some additional funds, to pay off other debt. As with the one before, this
can be both good and bad. It can be good because these loans typically offer the lowest
interest rate because they are relatively safe loans for banks. That is also the same reason
they are bad; if you do not pay them off, the bank can repossess your house. The other
built-in benefit is by refinancing, you can often get a lower interest rate on your house,
which can save you a bundle. As with the previous option, there's often a refinancing fee,
so use the amortization calculator.
With all of these methods let me stress that you should be very careful not to fall into the
same trap many others have. Too often families will take out a second mortgage or debt
consolidation loan to pay off their credit cards, but instead of using this is a means to
reduce their debt, they charge up all the credit cards again and end up in a worse situation
than they were before. Don't let this happen to you. Once you have refinanced to eliminate
any credit card debt, close those accounts. Just keep one open for emergency use only until
you get to a later step in this guide where you can destroy that one, as well.
Getting Insurance
Most people are only one major disaster or a few weeks of unemployment away from
bankruptcy. If you have done all this work to get out of debt, you don't want it to all be in

3. vain, just by one major crisis hitting you or your family. There's nothing you can do to
totally protect yourself from every type of catastrophe, but there are steps you can take to
significantly reduce your risk.
The rest of this article is going to be on insurance, and we'll start with the type of insurance
that is most likely to save you from being completely wiped out, medical insurance. This
is one a lot of people choose not to buy because it's quite often very expensive. This is a
very dangerous decision, though.
You never know when you will need medical care and we all know it isn't cheap. Even if
you are in perfect health, medical conditions can pop-up over night. You could wake up
tomorrow and either have a major internal problem show up, or possibly have an accident
and break a bone. You can easily rack up bills in the thousands, ten thousands or even
hundreds of thousands from a single incident, and you never know when one will strike.
Once this incident occurs, it's usually too late to get insurance.
If medical insurance is available through your employer this is usually the cheapest option,
however you can still get insurance if your employer doesn't offer it. The next cheapest
option is most likely to get a group plan from another organization you belong to. Some
examples would be a credit union or NASE. If you can't find a group program, you can still
buy insurance as an individual, it just typically costs more. The best way to reduce the cost
is to go with a plan that has a high deductible. You may end up paying $2000 or so if you
have a major incident, however it won't completely wipe you out.
If you own a home, you most likely have homeowners insurance because your mortgage
company has required it, but if not, be sure to get it. If you rent, you may think you don't
need insurance on your property, however if a disaster was to hit the apartment complex or
other place you live, you can still lose all of your possessions. You may think the
apartment's insurance will cover your losses, but it won't; you will need renter's insurance.
This is usually fairly affordable. If you own a car, you are required in most states to at least
have liability insurance, but depending on the value of your car and whether or not you can
afford to replace it if you were in a wreck, you may also want full coverage to cover any
damage to your vehicle.
The last type of insurance I would like to mention is life insurance. This is something
many people overlook, especially younger couples. If you are single and are not
responsible for supporting anyone you may not need this insurance, but if you are married
and have children or anyone else you are responsible for caring for, this is something you
are going to want to have.
To determine how much insurance you need, I suggest calculating how much your family
would need to get by with you gone and multiplying that by fifteen. This will most likely
be a shockingly high number, but it will allow you to support your family indefinitely by
allowing them to live off the interest from this money rather than the principal.

4. So far you have learned the impact of debt, how to analyze your debt, reduce your interest
rates, free up some extra income, pay off your debt, and make some money while you do
that avoid falling back into debt, and insure yourself against unforeseen circumstances.
So far, businesses have been making money off of you by lending you their money, now is
your chance to turn this relationship around and make a profit off of them by lending them
money. Welcome to the world of investing. There are many things people invest for, but by
far the most popular is retirement.
We'll start with the bad news, figuring out how much you are going to need for retirement.
First, you'll want to estimate how much you are going to need, or want in order to get by
when you are retired. Granted, your expenses will most likely be lower because your home
and other most other major expenses will hopefully be paid for by this season of life. I can't
give you a simple guide to tell you exactly how much you will need in this article, so I will
leave it to you to estimate.
Now that you have this number, multiply it by fifteen, this is the amount you need to save.
The reason for this is so you can live off the interest only, which will allow you to support
yourself for the remainder of your life. This will also allow you leave an inheritance for
your children. This will probably seem like an unachievable number, but don't abandon
hope yet; it isn't as difficult as it first seems.
The reason this isn't as difficult as it first seems is because of the magic of compounding
interest. If you were to start investing $100 each month at the age of 20 at 10% return per
year, by the time you are 65 you will have approximately $780,000. However, it's very
important to start as soon as possible. If you start at the age of 30 investing the same
amount each month, you'll only have $294,000. You're not out of hope though, you'll just
have to invest more. If you start at the age of 30, you'll need to invest approximately $260 a
month to have the same $780,000 at the age of 65. As you get older the amount you'll need
to invest goes up significantly, but typically so does your income.
Where to invest your money is something you should really talk over with a financial
advisor. I'll provide some very basic tips, though. First off, never put all of your money into
a single investment no matter how good you think it is. Nothing is guaranteed, and many
people have lost everything by investing in a single company. You should always diversify.
I would suggest five different investments, minimum.
Typically the higher paying investments are often the riskier investments, also referred to
as aggressive. If you are close to retirement, you should avoid these and go with something
much safer. If you have several decades until retirement, you can afford to ride out the ups
and downs in the market and will usually come out ahead by investing in more aggressive
stocks, early on. As you get closer to your retirement age, you should gradually start
moving your money into more stable investments.

5. I hope you have enjoyed this article series and it has helped you to get your finances in
order. If this article has helped you, please pass it on to your friends and family so it can
help them as well. For more advice, consider contacting a personal financial advisor.
REDUCE YOUR DEBT AND START MAKING MONEY !