Get out of Debt

[- Femme -]

Save $1,000 Cash as a Starter Emergency Fund (as fast as you can)

Money magazine says that 78 percent of us will have a major negative event in a given 10-year period of time. Life happens, so be ready. Stop everything and focus. Twist and wring out the budget, work extra hours, sell something, or have a garage sale, but quickly get your $1,000.

 

Pay off all your debt using the Debt Snowball

List all your debts (except the house) in order of smallest payoff balance to largest. Then pay the minimum payment to stay current on all the debts except the smallest. Every dollar you can find from anywhere in your budget goes toward the smallest debt until it is paid. Once the smallest is paid, the payment from that debt is added to the next smallest debt. When debt number two is paid off, you attack three, and so on.

 

Finish the Emergency Fund

A fully funded emergency fund covers three to six months of expenses. When the big stuff happens, like the job layoff or the blown car engine, you can't depend on credit cards. If you use debt to cover emergencies, you have backtracked. A strong foundation in your financial house includes the big savings account, which will be used just for emergencies.

 

Repeat

 

Chart your spending. For the next month (and you need to do it for a month because there are some expenses that only occur once a month) keep track of every dollar you spend — especially the cash (that's where many people spend a lot of money and don't realize it). You'll start to see places you can cut back. Maybe you spend more on meals out, on little impulse purchases at the CD store, on iTunes. Once you know where you're spending, you can decide not to spend.

 

Cut larger fixed costs . You know those bills that come in every month — cable, cell phone, internet, health club. Chances are you did without these things just a few years ago, so you have to ask yourself, do you really need 900 minutes a month of talk time now? Maybe not while you're trying to get out of debt. Cut back these services and you can generally find a couple hundred dollars a month (which is a couple thousand a year to put against your credit card bills).

 

Always pay more than the minimum. The credit card companies are not just being nice when they require only a small minimum payment on your total balance. They calculate this minimum to extend your payments for as long as possible, to boost their profits. Scrimp if you need to, and pay as much as you can above the minimum every month.

 

Stop using your cards. The last thing you want to do with heavy credit card debt is add to it. Take all your credit cards out of your wallet or purse, and leave them at home (though you may want to keep one for emergencies -- and, no, a really great sale or a cool new CD player does not qualify as an emergency). Cut up the cards if that's what it takes to stop using them. Some people keep their cards out of reach by freezing them in glasses of water.

 

If all else fails---> Perhaps your family or friends could help through a loan. Who else knows, trusts, and loves you like they do?

 

Sources: Don't remember, too many.

 

DO THE CURRENT STUDENTS OR GRADUATES OF SOL HAVE ANY TIPS ON REDUCING STUDENT LOANS OTHER THAN GETTING A JOB? MOST PEOPLE DO AND ITS SO DAMN DIFFICULT. THE IDEA OF ALL THAT RIBA IS JUST KILLING ME.

[Miskiin-Macruuf-Aqiyaar]

And if you accumulate too much debt and that list didn't work for you: Buy one way ticket to Soomaaliya, preferably to a tuulo. A lot of people did, while Visa and Mastercard are still looking every Cabdi Faarax's social insurance background check, most of them are chilling in Buulo Dhuumasho.

[Castro]

^ Or buulo Minneapolis.

[Baluug]

Ah yes, the old "max-out-the-credit-card-and-hightail-it-back-to-Somalia trick. Works every time.

[- Femme -]

Don't be giving me ideas boys. Honestly,a couple of angry creditors kept hounding us for a while because my brother had a name similar to a somali man who chalked up the charges and bailed out. I know a couple of people who've done that and its so sad.

 

Concerning mounting debts; I was reading in the paper yesterday that Taiwanese are commiting suicide over ridiculously large credit card debts; the banks are practicularly shoving them down people's throats; whether they can afford to or not; they have even gone so far as to call individual homes to offer packages. And since the interest is not regulated by the government; people are entering traps that they're not aware of.

 

Taiwanese credit card 'slaves': read here

[Katrina]

Femme, I cut my credit cards up last year. People accumalte most of their debt during the college yrs. If I use credit cards as a back up when does anyone ever have enough money to pay 'em back? I'd rather be super broke duing my college yrs and have a head start once I start working(IA). I cut corners by cutting my own hair (suck at it), never shop (unless its a neccesity eg. gloves, wool socks etc.), buy dry food in bulk (u'd think I was in the army), don't drive my car during the semester (save on gas and cancel my car insurance) and do my grocery by tagging along when others do theirs. I always ask myself do I need it or do I want it? It's bad enough I got loans waiting as quicksand.

I heard one cannot go to hajj until all their debts are paid off therefore I plan to aggressively reduce it as soon as I start working (IA).

[Pi]

Even though I cannot make any claim to opulence, I really need an accountant or a financial planner.

[Valenteenah.]

Sound advice, FF. It is also recommended that you keep the equivalent of at least 3 months pay in an easy-access savings account for those rainy days.

 

I have always been rather pathetic when it comes to money. I either don't have any, or I spend whatever comes in. Savings? Rainy days? 'Will they pay for pretty shoes?' Steady on...

 

I have been forced to start thinking of the future though (I want my shoe-purchasing power to stay strong) and have been attempting to put my finances in order. Budgets, Spending Schedules and monitoring forms have all been devised and monthly standing orders have been set up for extra loan repayments and regular saving...suffice to say, I have been a very good girl. But the most difficult bit is of course still to come - sustaining this good habit.

 

 

As I have never been one for rigid discipline, it's going to be a mighty struggle to keep up the good fight (and stay away from the shops) which will need to last into 2006 and beyond, Insha'Allah.

 

 

Oi, to those madly irresponsible people advocating pissing-off-to-Somalia-with-a-mountain-of-debt-and-your-tail-between-your-legs: what on earth is wrong with you?

 

It's an Islamic requirement that you pay off your debts! It would be tragic to die while you're in debt (it will fall on your family to pay it then), and as Kat mentioned, you can't make the pilgrimage to Hajj while you're still in debt.

 

Is it any wonder that Mortgage means 'Grip of Death' in latin?

[Rahima]

Just last night, I was invited over to a Moroccan friends place for dinner. Before dinner however we went out for a walk to the local beach and on the way back had a look at the seven or so homes of theirs in the South Melbourne/Albert Park area (my fellow Melbournians, I’m sure you know of the price tag I’m referring to here). What amazed me more than anything was that this man is not overly educated, came to Australia just a little over 30 years ago and now mashallah his homes alone (not to mention all the other investments including a Moroccan restaurant run by his lovely wife) are valued at over $1 Million each. In this space of time, they also had six children and managed to keep their Islamic beliefs.

 

He achieved all this without taking a dime of riba money. I plan to re-visit him.

 

As for now and for this year. I have made plans, I shall re-assess come December. Inshallah I hope to be able to stick to them, considering that aside from my uni debts (which get taken out of my account anyway) alhamdullilah I have none.