If you are in debt right now, it’s possible that you may remain in debt for the rest of your life. Ramit Sethi, author of “I Will Teach You To Be Rich,” opened with that insight in a video that guides people on how they can become debt-free.
The video contains several strategies, but Sethi starts it off by telling people to confront the brutal truth about their debt. Tackling it head-on instead of having a fuzzy idea of your progress will get you closer to zero balances. While looking the other way is the easier option, Sethi shares a hard truth that’s important for getting out of debt.
“Ignoring your debt doesn’t make it go away.”
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You have to start by tracking your debt and knowing which metrics matter. Sethi offers a roadmap in his video.
List Every Debt You Owe
Listing every debt you owe will give you a clear picture of how much you owe. You can also craft a plan of attack the moment you list your financial obligations.
Sethi recommends listing every debt’s balance, interest rate, and minimum monthly payment. He refers to interest as a silent killer that makes it more difficult to get out of debt. Credit cards are pretty notorious for this, with some credit card issuers charging 30% APR on their customers’ balances.
It can be painstaking to gather all of your debts. Start with the ones you see often, such as your credit card debt, mortgage, and auto loan payments.
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Review Your Credit Report
It’s possible that you don’t remember every debt you owe, and that’s why Sethi suggests that you review your credit report. This document contains your credit history, and you may find some old debts that you forgot about.
However, a credit report may contain some mistakes, such as showing an old debt that you have already paid off. Getting this information corrected on your credit report can boost your credit score. A higher credit score can make it easier to secure lower interest rates on your future debt.
Sethi suggests using AnnualCreditReport.com to pull your free report. You are allowed a free copy of your credit report from each of the three major credit bureaus every 12 months.
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Monitor Your Progress
Once you have all of your debt laid out, it’s time to make payments and commit to a plan. You can decide if you will work on an extra side hustle in the short run or if you will reduce expenses in other areas to trim your balance.
A financial journal can be a great resource for tracking your progress and documenting your journey. It’s easy to think about how much money you owe without acknowledging the progress you have made. Seeing that you’re chipping away at your balances can give you the motivation to instill good financial habits and get to the finish line.
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This article Ramit Sethi Says This Mistake Can Keep You In Debt: ‘Ignoring Your Debt Doesn’t Make It Go Away’ originally appeared on Benzinga.com
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