Successes with most things in life come down to planning and mindset. Debt elimination and debt consolidation also require planning, action and a mindset. But elimination of debt is far different than consolidating debt.

Let me say from the start my ultimate goal is debt elimination. What exactly do I mean by debt elimination? My goal and mindset is to NOT use or have any need to use debt in my life. To be financially free to spend what I want as I want without going into debt.

Yes this includes the house, cars and big screen TV. For some this may sound like a dream – for others a reality or goal – for me it is a focused mindset.

The term debt consolidation and elimination are often lumped together. People I speak with usually mention them in the same sentence as the same thing - yet they are NOT - at least in my way of thinking.

As I said to reach my goal some planning needed to happen, without it - it was just an idea.

When starting down my path to debt elimination it started with debt consolidation. The consolidation plan may not be in the same traditional method of a consolidation loan but I did explore it and you should too. Look at all your options before taking any steps. However, my method for me was still consolidation.

Here’s the method that worked for my situation with the ultimate goal of debt elimination and not only consolidation.

Think of money and the expenses in your life as piles on laundry. For the guys they may have more trouble with this!

The laundry needs to be sorted before washing.

• Whites
• Light Colors
• Dark Loads
• Specialty – bedding etc.

First the items to be washed are put into one place the laundry basket – like all the bills come into one place. Then the clothes are sorted into piles depending on the criteria as mentioned above. First it was the regular monthly bills or necessities:

• Mortgage or rent
• Utilities
• Insurance
• Food
• etc.

Next we organized all the bills, which may be monthly but could have some items that may not be necessities. Here is where my debt consolidation process started. First, I took all the unnecessary bills or bills that could contain extra charges where I had some control like unpaid credit card balances, payments on other consumer purchases – cable, direct TV, cell phone extras, etc.

The next step was to review each of the bills already consolidated into piles and give them a hard look. Identify any potential extras and eliminate those extras not needed or used. For my family it involved consolidating our cell phones into a family plan making sure we reviewed the needed minutes and changed our plan to one with enough minutes to meet our needs. The charges on minutes when you go over can be very expensive. Any extra features were also eliminated or reduced.

This one small change dropped our monthly cell bill almost $80 per month - from about $230 to about $150. With kids in college they use their cell phone instead of getting a line in their apartment. We consolidated the phones and eliminated extras.

We followed this exercise with all of our bills. It’s surprising how many little extra charges you find on the monthly bills.

Once all the bills were reviewed and cleaned up we felt it was time to attack our next consolidation elimination step. This step involved taking one pile of bills and ranking them based on what which bill we wanted to paid off first and eliminate the debt.

For us it involved reviewing the four credit cards we used and consolidating the credit cards balances into two cards. One credit card for business the and one credit card for personal the - notice both cards provide rewards or points.

When we consolidated the debts we lowered the monthly interest rate on the cards and plan our purchases to not make stupid buys. When we do use our credit cards we get at least some bonus points for later use.

For my business which is online I do have some monthly charges for services. Each of those services was evaluated consolidated if possible and/or eliminated.

This process helped us identify wasted money. This is not about living so tight we do not spend money it is about taking control of our money and using your money wisely. Why not spend it on the family instead of giving it to a company for a service I’m not getting the full benefit of?

Next the focus after consolidating was to eliminate. The “new found” money we saved from other bills we applied to the unpaid balance on one of the credit cards. We put all of our focus on one credit card to eliminate that debt. I can happily report that one card is paid off. It started first with consolidation and end with debt elimination.

That extra money paid on that credit card was then all focused on the other card and we are well on the way of eliminating the debt on that card. By the way that card was from stupid business purchases – but no more.

After that card is paid off all we have left is a car loan to pay off and we are then debt free – the house is paid off. Time to do some serious wealth building!

So you see debt consolidation is a part of a debt elimination plan. You have to find the approach that works for you. For some they go the way of a consolidation loan, others combine debt from multiple credit cards onto one card and others attack one debt at a time.

No matter how approach your debt issues it requires a plan, focus and action. Simply consolidating your bills into one payment does not fix the core problem of unwise or unplanned spending. For us it involved a lifestyle spending change, the result has been a better life with less stress. Now that’s home improvement!

Have you ever asked yourself WHY you constantly run your credit card up to the limit without thinking? Finally the day comes and you take some time to look at the balance on your credit cards and you are overwhelmed!

Personal Debt Credit Card Statistics

According to the Federal Reserve the average median household income for 2006-2007 was about $43,000 per year. Of that $43,000 in income almost %5 is also sitting on a credit card or $2,150.

That number may not seem very high an but of course it is an average. According to myFICO when the numbers are expanded more about 15% of credit card holders show a combined balance of over $10,000.

Is it any wonder people feel pressured by debt!

Assume for just a moment that your credit card has a balance of $3,000 and carries a low interest rate of 9%. You do know what the interest rate on your card is don’t you? Call to lower the interest rate!

If you make the minimum payment on your balance and never charge again on that card, do you know how long it will take to pay it off?

The answer is approximately 50 years and the interest over that period will be about $1,500. You’ll pay 50% more of the items you purchased by using the credit card than from paying cash.

You can brush off the above facts or you can get serious and take stock of where you are in your use of credit and credit card balances. Pull out your statement and give it a thorough review.

• What is the current interest rate?
• What is the minimum payment?
• How much did you pay last month?
• Did you pay off more than you charged?

You cannot address the problem unless you know where you are. If making the minimum payment is an effort – get prepared – your number will probably soon be ringing with creditors calling for their money.

It’s time you started looking at ways to reduce your debt, consolidate your bills and spend more time on learning about money and how to manage it properly than you do planning your next getaway or shopping trip.

Credit Cards don’t come with a user manual. What we know about credit cards and their use comes from television, watching our parents and friends. Like any tool there are some guidelines you should follow before jumping in and playing in the game of debt.

Here are some “Usage Rules” for credit card users

Credit Card Usage No No’s

• Purchasing with a Credit Card of Everyday Items

  Using your credit card like cash for everyday purchases like food and clothing can quickly pile up debt and start you with a habit of bad spending choices. For items you buy on a regular basis use cash or a debt card but leave the credit card hidden away in your purse or wallet. Read this overview on credit

• Paying the Minimum

  When you make the minimum payment on your balance each month you’ll increase the amount of interest it costs you to buy items and increases the time it will take to pay off the balance.

  If you cannot pay off the balance at the end of the month pay as much as possible on the balance and stop charging until you get caught up.

• Living Large

  Living above your lifestyle and earnings can quickly spiral into deep debt. Face the truth! If you cannot afford to buy the item today you probably will not be able to afford it next week or next month.

• Closing One Card for Another

  With so many deals on credit cards hitting your mailbox each week opening a new card can be tempting. However, you need to know the impact closing a card can have on your credit score.

Credit Card Usage Do’s

• Planning Purchases

  Just because you can buy it does not men you need it. Make smart choices on what you buy and plan your purchases.

• No Money No Pay

  If you cannot make your payment on time let your creditor know in advance. The worse action you can take is not paying at all. Creditors want to be paid and usually will work with you if they know the situation. Call your creditors, tell them of what is going on and ask for the late fees to be waived.

• Stay Within Limits

  Having a credit limit of $10,000 does not mean you should keep a balance of $9,500 on your credit card. If you cannot pay the card balance off every month, try to have no more than 30% of your credit limit used up.

  Keeping the balance low will help with your credit score and a lower balance is quicker to pay off than a high one eaten up with interest charges.

• Ask for a Lower Rate

  Always know the interest rate on your card. Don’t be afraid to contact your credit card company and simply ask for a lower rate. If you have been making payments and not running behind they should be more than willing to lower the rate.

Learning to use credit smartly and planning your buying will keep debt to a minimum and life less stressful!

Building good credit is so important if you plan on buying a home, looking for way to finance higher eduction and even securing a better job. You credit plays a part in everyday life.

Our education system does a terrible job of teaching young people about the impact of credit. All starting with that first credit card you begin to define your history of credit. The credit limit is not what defines your , using credit responsibly does.

Do you use your credit responsibility or does credit control you? If you want to build a good credit history follow these few credit tips.

Only Use Credit If You Can Afford To

When you plan your purchases and build a track record of not over spending you are communicating to lenders and creditors that you understand and know how manage money. This will make borrowing later if needed easier and making back easier as well. Buying only what you can afford will also keep you a safe distance from debt.

Only Tap Into a Small Amount of Credit You Have Access To

Hitting your credit limit or coming close telegraphs your lenders of how irresponsible you are with credit. What does maxing out a credit card tell lenders? It tells them you may have some or are heading for financial difficulty. As a rule say below 50% of your credit limit, better yet stay below 30%.

Stay Away From Collecting Credit Cards

Credit cards can be a real temptation. The more credit you can touch the more you’ll often spend. Most people need no more than one card. I have a business credit card and a personal credit card. What more do I need. I manage those cards and only those cards. They provide me enough of a credit limit to purchase anything I need.

Pay Your Balance in Full

Pay off the credit balance every month. If you follow the step above and only buy what you have planned and can afford, paying the balance off every month should not be a problem. Remember a part of your and credit history is you timeliness of payments. Pay your balance off and on time and your credit will improve.

I know paying the balance off each month can be difficult once you’ve fallen behind – I’ve been there. Start this month paying off all you’ve purchased, plus the interest and then anything else you can afford. If you cannot do this then stop charging! Always pay more than the minimum payment.

If you use credit wisely and be smart you can enjoy the use of money and credit cards, if not they can be your downfall and slave.

The use of credit in today’s “must have it now” society continues to grow at a rapid pace. Just the other day I was speaking with an friend trying to get their financial house in order.

They have started putting everything on their credit card and paying the card off in full every month. Their reason is for this plan is they can see where they are spending money since the online statement gives them a break down.

The shock on their face when I told them they were using credit for their purchases and not cash was amazing. They never thought of it that way. As I mentioned in the credit overview a credit card is not cash!

Credit finds its way for more uses than getting a loan or signing up for a credit card. More businesses are looking at your credit as a way to measure doing business with you and supplying services.

How does having good credit affect our daily life? Let’s see…

The Place We Call Home

If you are buying a home, renting an apartment, condo, townhouse or home the lender or landloard wants to know they will be paid and you will not default on payments. Without good credit you may need a bigger downpayment or security deposit. It’s also possible you could be denied a loan completely.

What We Drive

Without cash to plunk down when you buy a car a loan will be in your future. Your credit status will determine not only if you qualify for a loan, the also the interest rate and the amount. Good credit usually gives you lower interest rates and allows you to qualify for larger loan amounts.

When buying any kind of transportation you must remember the car dealer makes their real money on the financing!

Who You Work For

Employers want to limit their risk and credit checks are now a part of the employment process. Employers want – responsible employees – and your credit is a indicator of your financial responsibility.

Employers could look at the amount of debt you have and become uncomfortable with the salary they can offer knowing you cannot be financially stable with that income level compared to debt.

Electric, Gas, Telephone and Other Utilities

Paying the electric bill that comes every month is a part of credit also. Utilitiy companies want to look at credit before turning on the services. Just like a landlord or mortgage lender they want to know they will be paid for their services.

When I moved into my new home in another city the electric company did not require a deposit, nor did the telephone company. However, the local water company did.

Starting Your Own Business

Many people including myself have dreamed of running their own business (I have for over 30 years.) Starting a business requires money. If you have not saved to use your own money, you’ll need to get a loan. Again good credit comes into play. Interest rate, terms and loan amount will all be affected by your credit.

I do remember when I was about 20 and as green as could be wanting to borrow about $5,000 to start a business. The bank gave me a firm NO. It was a smart move on their part. They would have been paid back but I clearly was not ready to take on a loan.

A few years ago I wrote the bank president telling him the story of my rejection and thanking him for personally turning down the loan. He probably thought I was crazy.

Remember – anytime you borrow money or ask for services to be extended to you, your credit will be talking for you as a representative of who you are and how responsible you will be. Make sure your credit is good and speaks well of you!

Credit as a powerful tool. It gives you buying power, but without undestanding how to use credit correctly, the use of a credit card in the wrong hands can be addicting. It makes going to the store dangerous.

It’s so important to undertsand how credit works, what credit is and how to manage credit as a part of a financial lifestyle. Making credit mistakes is easy – mistakes that in the end could cost you money each month.
 
No matter where you are in your financial journey, it is never to late to begin to learn more about credit, it’s use and how you can improve your management of it.

Introduction to Credit

Some of us remember when paying at the checkout involved pulling out cash or writing a check. For more recent generations paying with a credit or debit card is what they know. Credit cards and their widespread use has only been popular since around the mid 1970’s.

When the credit card actually came into use does not matter. Those numerous small pieces of magic plastic tucked away in our wallet meant to us we could get anything we wanted – it was a substitute for cold hard cash. The fact is credit cards are not a substitute for cash – but a loan. It’s a loan you must pay back.

Credit – What Is It?

When you purchase anything on credit you are making a promise. It’s a promise of buy it today – pay for it tomorrow. Credit and access to it allows you to buy things when you do not have the cash available.

Read that statement again – It is key to learning and understanding how you use and control credit in your life.

"Credit and access to it allows you to buy things when you do not have the cash available."

Before a credit card company, bank or any kind of financial lender will allow you to tap into the wonder of credit, they first need to determine if you are a trusted party. A party who will repay the money or credit they have extended to you. They determine if you are “financially trustworthy.”

The financial community uses a variety of factors to make this determination. The most popular tool of factor is your credit report. A credit report is your “” on how you have used credit in the past.

Lenders consider your history of credit to be a very good and clear indicator of how you will use credit in the future. Your credit report will include your past credit history and your current credit score.

For individuals starting to establish credit or have no credit history built yet, may find the lender looking at salary and how long you’ve been employed at a company. Lenders could ask someone with good established credit to to co-sign with you. This means both parties would be responsible for the credit.

How Does Credit Work?

To establish some form of credit along with a credit limit you’ll first need fill out an application to apply for a loan, credit card or whatever. The lender will take the information on the application do some research on your credit worthiness. Using your social security number they should be able to review your credit report and history.

Once they gather the information they can make a determination on your trustworthiness as a borrower. Once approved the lender will decide how much credit to extend and terms like interest rate, payment schedule, late fees and any other cost associated with using the credit.

Lenders usually set a maximum credit limit you can access all based on your credit history. If you exceed the credit limits in most cases a monetary penalty is accessed.

Once credit has been extended lenders will provide billing statements detailing:

• Purchases made
• Payments or credits
• Interest charged
• Late payment charges
• Minimum payment to be made
• Due date of payment

Credit is a big part of most of our lives. Knowing how it works, how you can build and maintain a good credit rating and how to use credit wisely is all a part of your finacial health.

How’s Your Credit Health?

Living with a cloud of debt always hanging over your head can be stressful making everyday seem to drone on. Coming up with a debt reduction plan to drop the balance of the credit cards and loans can at times seem as wide as the Grand Canyon.

Paying off the debt you've acquired is not an impossible mission. Yes, it will take some effort and sacrifice, you will experince some challenges, but all the effort will be worth it in the end when you can say goodbye to the chain of debt you live will.

Your "debt reduction plan" needs to be down on paper. Think of it as a roadmap. You use a map to guide you and let you see where you are along the way. You can watch your debt map as your guide to gauge your progress as you travel down the road to freedom.

Along the way you'll need to stop and compare the budget you started with  against the real numbers as you make the budget work. The budget is only a part of the overall plan. It's the gas in the tank.

Now get started on the trip - make a get out of debt plan and follow it!