By Ashley Eneriz GOBankingRates.com.
At some point debt became the normal way of living. Need a car? Just take a loan out for it. Need a new sofa or can't afford your groceries this month? Just put them on a credit card. The average household boasts more than $15,000 in credit card debt, $155,000 in mortgage debt and $32,000 in student loan debt, according to Nerdwallet. While you may not be alone in the debt boat, you shouldn't consider it a normal part of your budget either.
This year, think of your debt as a blaring emergency. Because the truth is that your debt is a sign that your budget and financial situation is not as healthy as it should be. A very ill patient does not look around the hospital room and feel comforted that there are hundreds of others with the same disease, so it must be normal. No, that patient does whatever it takes to get back to a healthy way of life, even if it means going through the extremes of raw diets or painful treatments.
Look at your debt as a sign of the failing health of your finances and be prepared to do anything to get your budget back to a healthy way of living.
Many people are fooled into thinking that some level of debt is beneficial. They overspend, thinking that they are improving their credit scores. This is not always true and the benefits of debt do not outweigh the consequences. Here are just a few of the negative side effects debt comes with:
INTEREST RATES Even if you are paying a low interest rate on a debt or loan, you are still paying someone extra to borrow money you didn't have. Interest rates can suck your finances dry and cause you to pay too much for purchases. For example, if your interest rate is just 2 percent higher than prime on your mortgage loan, you'll end up owing thousands of dollars more for your house.
LOWER CREDIT SCORES Lasting debt ruins your credit score. Even more importantly, your credit score will take a big hit if you miss a payment. A lowered credit score means it'll be more difficult to qualify for a mortgage or other loan. Sometimes a bad credit score can even affect your job search.
RESTRICTED FREEDOM You work hard for your money, so it's depressing to see the majority of your paycheck go to debt repayments. Think about all that you want to do in life. How many of your dreams are restricted by financial issues? If you hate your job and want to quit, chances are you cannot until you get another job because you have too many bills to pay. If you wanted to travel to an exotic place, chances are slim you'll get to do that because you don't have the extra income to spend on things you want to do.
HOW TO PAY OFF DEBT QUICKLY Once you realize that debt is not a good thing to have around, it's wise to start paying off as much as you can, as quickly as you can. Here are a few ways to pay off your debt quickly:
-Consider consolidation: If you have multiple credit card debts, consolidating them can make them easier to pay off. The point is to move over your high-interest debts into one lower interest monthly payment.
-Make larger payments temporarily: If you're really going to get out of debt, you need to stop making just the minimum payment. Instead, start making larger payments temporarily. Consider where you can cut out expenses in your budget. Perhaps you can give up cable for three months or stop eating out for two months and devote those funds to your debt repayment. Also consider throwing huge chunks of money at your debt, such as a work bonus or your tax refund. Obviously, it's not fun to watch a huge amount of money go toward debt, but these steps will get you out of debt much faster.
-Refinancing: Consider refinancing your mortgage or car payment to get a lower rate. Refinancing your home loan is also extremely wise if you are still paying private mortgage insurance, or PMI, and can potentially save you thousands a year.
-Budget for debt payments: You don't regularly miss your water bill or electric bill, and that is because it is a non-negotiable expense that you budget for. Make your debt a non-negotiable bill too. This way you will always be on top of paying back your loans.
No one ever said that paying back debt was easy, but with the right mindset, you can get out of debt and become financially healthy. ___ Ashley Eneriz writes for GOBankingRates.com (<http://www.gobankingrates.com>), a leading portal for personal finance news and features, offering visitors the latest information on everything from interest rates to strategies on saving money, managing a budget and getting out of debt.