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You are the one to blame for being in debt. In very rare cases there may even be external factors. But, for the most part, the blame lies on impulsiveness and lack of discipline. I know this because I’ve received hundreds of emails or personally dealt with client consultations that said phrases like: 

  • “I overreacted with my credit cards and an overdraft.”
  • “I can’t pay my debts. My expenses are always higher than my income. “
  • “There is always money at the end of the month and I don’t know where that money is going.”

However, I have good news.

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Consolidating (or unifying) your debts means taking out a loan for the full amount of your outstanding balance, paying off all your debts, and just getting that loan debt help by click here to signup with dedebt. What are the advantages of exchanging “one debt for another”?

There are at least three very important advantages:

  1. Having only one debt: at first, it may not make much sense, because the outstanding balance is the same. However, you will now have to worry about just one monthly payment.
  2. Interest rate reduction: When you have multiple debts, some of them are likely to have credit cards and overdrafts, which have very high rates. After consolidation, the interest rate of the new loan is much lower.
  3. Reduction of monthly payments: After consolidation, you can negotiate smaller installments that fit your budget, ie 20% of your income.

In short, consolidation allows you to unify all your debts through a lower interest rate loan.

How to get out of debt

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 Briefly, you need:

  • Guarantee your future prosperity;
  • Make debt stop growing;
  • Being able to pay off all debts.

To achieve each of these goals, try to strictly follow this rule. From all your recipe:

  • 10% must be saved;
  • 70% (maximum) should be used for its maintenance;
  • 20% (minimum) must be used for debt repayment.

If you have read the excellent book The Richest Man in Babylon, you should know that this income distribution was taken from there.

Save even though you are in debt

One may ask, “Should I save even though I am in debt? Are the interest rates on debt higher than the profitability of savings? ” Yes, you should save even in this situation. The amount you “lose” on the difference in rates will be offset by the discipline you have gained in saving monthly. And that is very valuable. Anyone who already has the discipline of saving value every month knows what I’m talking about.

There is more pleasure in seeing a supposedly surplus cash reserve growing than there could have been by spending it.

Spend only 70% of what you earn

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The famous “spend less than you earn” rule must be taken very seriously from now on. In doing so, one thing is certain: your debt will stop growing. To do this, you must budget all really essential expenses, write down all your expenses for 30 days, and compare them with your budget.

You will know exactly where you are failing and will be able to remedy this problem. A very healthy attitude is to stop using the credit card. The fact of parceling out a purchase does not diminish its value. Worse, it distributes the expense over several months, committing an entire future budget.

Credit card misuse is one of the biggest villains in your pocket.

Negotiate and pay your debts

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It is very likely that the remaining 20% ​​will not be sufficient to repay all debts. It may not even be enough to pay the interest on these debts. But this is where you should start acting. The first thing to do is to put all lenders on paper, noting how much you owe each of them.

The second step is to look at each lender to expose your situation by showing the total size of your debt and how much you can pay per month. You will be amazed at the results of these negotiations. When you show someone your determination to repay a debt, you will find that they are even more determined to get paid. Then it is likely to offer you good discounts. After negotiating your debts with all lenders, check how much your debt balance was updated.

Conclusion: To recap…

Where there is determination, the way can be found.

In this article, I showed that the debt settlement plan consists of:

  • Save 10% of everything you earn;
  • Keep up to 70% of your monthly income;
  • Use at least 20% for debt repayments.

I explained how each of these strategies should be put into practice and why they exist. Finally, I paid particular attention to the debt negotiation and payment phase, emphasizing the debt consolidation strategy. Getting rid of debt and organizing your financial life is not only good for your pocket. It improves your relationships, your self-esteem, and even your health and well being.