The Major Components of a Healthy Financial Plan: Debt Reduction Plan

Debt in our culture today is one of the most heavily marketed things in America.  According to a March 2010 study by the Federal Reserve, Americans had approximately $2.45 trillion in consumer debt.  If your debt is causing you stress, you are not alone as a recent study found that 46% are suffering from debt-related stress.  Getting out of debt should be a priority for all of us and can be done by making sacrifices no matter how much income one makes or how much debt they have.

The reason behind getting out debt is pretty simple; the greatest wealth building tool you have is your income.  You can not build wealth by having your income go to the bank in forms of interest payments instead of paying yourself.  Getting out of debt also reduces risk.  By being out of debt the risk of having a major financial catastrophe falls dramatically.  Think about it, if you have no car payment and you lose your job, you will not have to ever worry about losing the car because YOU own it and not the bank!

Although the reasoning behind getting out of debt is simple, the how is difficult.  To put it simply, debt is a habit issue.  Unfortunately, habits are hard to break and there are no quick fixes. To start off however, you need to stop relying on debt as a way to get stuff today.  Instead, start asking yourself the question, “How much?” instead of “How much down and how much a month?” After deciding not to use debt from now on, you are ready to start reducing your debt.  Paying off debt takes time; how much time depends on your income and debt levels.  We recommend paying off your debts using the debt snowball, which is listing your debts smallest to largest and ATTACKING the smallest debt first with focused intensity, working your way up to the largest debt last.

If you do not have a debt reduction plan in progress, then do not wait and start one today!  Most Americans do not feel financial peace, but by reducing your debt you will be on your way.   If you need help assessing your situation and setting up a plan please contact us and we will be more than glad to meet with you.

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