Getting out of Debt

One of the most important steps in becoming financially free is getting out of debt.

First and foremost: stop using your credit cards.

Think of it this way - if the pipes in your house spring a leak and your basement is flooding, the first thing you want to do is plug the leak. Not get a mop, not even call the plumber. The first thing you do is stop the water from gushing into your house.

Same concept with the cards. Every time you swipe your card, you are punching a hole in your wealth pipe. So: If you want to get out of debt, stop using the cards.

Next step is to organize and take inventory of your debt. Gather the most recent statement from each of your creditors - credit cards, school loans, consumer loans (for example, car loans), and your mortgage. Create a list of each creditor, and include the minimum monthly payment, the total amount you owe, the interest rate, and the customer support number. Total both the minimum monthly payments and total amount owed for all debts. This is your starting place.

Next you want to call each of your creditors and ask if they can reduce your interest rate. Don't let this step scare you, people do it all the time, and the bank will never reduce your interest rate if you don't ask, even if you've had perfect credit and payed early for years. You have to ask in order to receive. Just call and ask. Mention that you're considering transferring your balance to another card that offers a lower rate. The worse they can say is no.

Caveat: It's harder to get this approved now in the current economy - in fact banks have been raising rates out of the blue for even their best customers. Keep an eye out for these letters - they usually come in a plain envelope designed to look like junk mail so you won't look at it. There is always an opt-out clause. Generally you just have to send in your name and account number with a statement saying you aren't accepting the new terms. As long as you don't use that credit card, they'll let you pay off the balance with your original interest rate. And you aren't using your credit cards anymore anyway, right? ;)

The next step is to start paying off your debts using the snowball method. Organize your bills from the smallest amount owed to the largest. You're going to start with the smallest amount first, even if you have other bills with higher interest rates. The reason for this is psychological - in order to stay motivated on your debt reduction plan, you need to see results. Tackling the smallest debt first is going to give you faster results, and actually paying a debt all the way down is going to be hugely motivating for you.

So you're going to start with the smallest debt first, and you're going to add a certain amount above the minimum every month. If your current minimum payment is $125, and you add $25 to your snowball payment, you're going to pay $150 every month to that debt, even as the minimum payments go down. Once that debt is payed off, you're going to take that $150 you were paying and start applying it to the payment of the second smallest debt until that's paid off, and so on until all the debts are paid off.

So to sum up - here's what you're going to do next:

1. Stop using credit cards.
2. Make a list of all your debtors, the minimum payments, the total amount owed, and the interest rates.
3. Call your creditors and ask them if they can reduce your interest rates.
4. Start snowballing your payments, starting with your smallest total amount first.

Next week I'll start posting ways to earn extra income, which you will add to your snowball payments. Once you start seeing results - and how quickly your balance goes down - you're going to start loving this system. It will give you a feeling of control in an area of your life that has been controlling you instead and you will get out of debt that much quicker.

To your freedom,

Juli Johnson

Taking Ownership of Your Life

The first step in achieving personal freedom is taking ownership of your life. Own your choices and the results of those choices. Own your current situation. Own your life as it is right now as an example of the law of Cause and Effect in action. Take ownership of the fact that your past actions have created your current circumstances.

This may be difficult to do at first, but what follows is the realization that the choices you make right now will have a direct impact on your future circumstances. What follows is the knowledge that YOU have control over your future.

Yes, bad things happen to good people - people get laid off, their spouses cheat, our babies grow up and leave us, and we get menopause. And that's just normal bad stuff, the kind of stuff that feels like a slap in the face because it's such a damned cliche. The kind of bad stuff you can sum up in one sentence because it's so common.

Stuff happens. It's how we react to the stuff that matters. In other words:

Events + Response = Outcome

If you don't like your outcomes, you need to change your responses. This principle is expanded on in Jack Canfield's book The Success Principles: How to Get from Where You Are to Where You Want to Be, which I highly recommend.

When bad stuff happens, yes, you need to acknowledge it and feel the pain - I'm not advocating denial. But at a certain point you need to get back in the saddle - decide who, what, and where you want to be - and take action. Do not let the bad stuff define you.

If you need more inspiration, take a look at this video from Tim Ferris' blog:

Introduction

Welcome to Bid4Freedom.

Freedom means not being owned. Not by a bank, not by a business, not by the medical industry, or by any other institution.

In this blog we're going to be concentrating on financial freedom. The goal isn't about making a six-figure income or retiring to Tahiti in six months. It's about finding a way to meet your basic financial needs online through multiple recurring sources so that you have choices.

We will explore a variety of ways to make money online, concentrating on methods that, though initially will require a bit of effort, will eventually be low maintenance, allowing us to build multiple streams of income online.

If you then choose to use your freedom to build a better mousetrap so you can retire in Tahiti in 6 months, that's great. Others of you may just want to be able to stay home with your kids, go back to school, or take a year off to read.

Whatever your ultimate goals, freeing yourself from the indentured servitude that most of our lives have become will help you get there.