Okay, so here’s the scoop: You can never completely avoid debt. Show me anyone without any debt and they’re either HUGE sacrificers, they’re millionaires, or they don’t have a penny to their names. How do you go about Debt Management ?
Here’s what we did (and by no means do we have anything much or are rich, just so you know!) We took out some small loans with our credit union / bank. Then, once we had paid them back, on time, early, every time, they said we had unlimited credit pretty much, as long as we could make the payments. Basically, we established GOOD CREDIT with a financial institution. This allowed us to get a loan for our vehicle, which is paid down through sometime in 2009, again, the key here is to pay AHEAD, pay $300 if your payment is $225. This will lower your overall interest and provide a cushion should you fall into hard times (be sure to check with your financial institution to be sure they don’t require a payment every month before you skip one).
In other areas, we did things such as taking advantage of no payment no interest furniture loans from places like Furniture Row/Oak Express, and buying one or two pieces at a time to keep payments low. We purchased dining room chairs, complete bedroom furniture, and some of our living room furniture that way. Basically, the deal is that if you take what you buy (say it’s $1000) and it’s financed for a year at no payments no interest, if you divide it by 12, or even 10, and pay around $100 a month, you’ll pay it off early, and avoid the outrageous % rate of interest that is tacked on. I would urge you to ONLY do this, however, if you can make the payments and pay it off before the grace period expires. Otherwise, you’ll get that extra $200 + added onto the end of your ‘loan’ — the good thing is that depending on what you buy, you may have up to 5 years of no interest, as the economy does not always allow people to buy brand new at this point in time. Deals are being made to allow you to purchase, so that they always have money coming in, AND of course, they “want you” to default so that they get that extra interest. Also, you should treat credit cards very carefully, pay off your highest interest rate first, or transfer balances to lower rate cards (and THEN pay them off). Keep a maximum of 2 or 3 cards and shred the rest once they are paid off. If you know you have a good credit score and you still have a variable rate card, see if your company will switch you to a lower fixed rate, you’ll have to call them. Oh and if you have to have that store card from Bergners or wherever, be sure you can pay it off that month, as they charge upwards of 25% interest for a store card. Use a lower interest card to pay for a bigger purchase. You’ll be happier in the long run. That’s how we manage our debt in a shortened version.