I wish I was making this up but this is a step by step guide on how I got into a ton of debt over the years. My goal here is to help you avoid some of the mistakes that I made and hopefully set you up for a better financial future.

Step 1

Get a student loan and ask for more than you need.

Post secondary education is a very valuable asset and a worthy pursuit; unfortunately this can come with a very large price tag. I wasn’t fortunate enough to qualify for a scholarship and had to foot the bill on my own. Lucky I managed to avoid taking out a student loan and went to a local college where I could afford the tuition (barely). Many of my friends are still paying off their student loans today.

Student loans can burden you for many years after you graduate and if your chosen career doesn’t work out it could take you a very long time to pay the loans back. If you can find a similar program at a local college or university seriously consider attending and save some big money and stress. (if you have kids set up a college fund for them now and ease the burden later)

Step 2

Get a credit card and use it for everyday purchases.

I used to buy groceries, gas and convenience store items on my credit cards with the intention of paying them back right away. While I did manage to collect some big rewards I managed to accumulate a small balance each month that seemed to grow bigger every week until I could only afford the minimum payments.

Many people will tell you to never get a credit card, and for many people that have poor spending and budgeting habits such as I did when I was younger that is sound advice. If you are not an impulsive buyer or use it for everyday purchases though a credit card may in fact be beneficial in helping you build a good credit score. A good credit score is essential if you want to buy a home in the future and not get a terrible interest rate. That is if you are planning on getting a mortgage.

Step 3

Leasing a new car

My first car I ever owned was leased, it looked great and I loved it. After about a year or so the novelty wore off and I was stuck with a 1 year old car that was worth much less than I owed on it. 4 years after that and I decided to buy it out (with borrowed money of course), for about $1000 more than it was worth and then had to pay to have it certified. It took me 8 years to pay for this new car, not to mention the thousands of dollars I paid in interest. Avoid leases and payment plans, if you need a car buy used and save up for a new car.

Step 4

Buy a house with a 25 year mortgage

Did you know that you can buy a home with $0 down? I did and I almost lost it. After a few months I was in over my head.

As a rule you should aim for no more than a 15 year mortgage and put down at least 25% of the purchase price as a down payment. You can get away with 20% in some cases, other than that you should rent and save until you have enough. When it comes to payments if your mortgage payments are more than 40% of your gross monthly income, you can not afford it. (I would go even lower and limit it to 35%

Step 5

Don’t pay a cent for a year - Furnish your new home on store credit

Those deals seem great at the time and you have every intention of paying off the furniture (couches, TVs, kitchen appliances) before the year is over but sometimes life gets in the way and at the end of it you don’t have enough to pay it all off. Then they get you for the whole amount plus interest (28 % for the whole year. ouch).

That happened to me on my first LCD TV I purchased $1400 turned into $1820 after interest and fees. Save up for these big purchases and pay for them in cash. You would be amazed at the deals you can get just by pulling out a wad of cash and making an offer to pay for the item on the spot.

That is basically how you can a mass a huge amount of debt in a relatively short amount of time. I realize I left out the wedding and the kids but those came after I got my financial act together.

The scary thing is that this is the route that millions of people are taking these days and they are in for a major shock when the debt gets so large that the “consumers” will get “consumed” by the payments until they lose it all or make some major lifestyle changes.

How Debt Settlements Work and What Are the Pros and Cons Debt Settlements?
By [http://ezinearticles.com/?expert=Erik_Stump]Erik Stump

Debt Settlement is otherwise known are arbitration process where both the debtors and the creditors negotiate on a common platform to provide an easier and definite way to eliminate debt. This idea has been successful in bringing positive approach among people and has boosted their confidence in the financial system. History has seen many entrepreneurs and businessmen losing their grounds and eventually getting trapped under huge loans. The options of debt settlements are indeed well established and proven; however we should be well aware of the pros and cons of it before going for it.

The advantages of debt settlement are -

The main intention and objective of debt settlements are to reduce the total outstanding balance and allow the customer to return the money with ease. These settlement programs let the customers manage the regular commitments and the repayments easily.
The credit ratings are safe and you need not worry regarding loans in future. Also all your accounts remain untouched and you can continue using them as usual.
The interest rates applied on the remaining amount is quite low, which means you will have to pay the balance amount with easily instalments not really feeling the pressure.
The credit card companies and the banks will have to stop nagging their customers according to the settlement. If you continue paying the negotiated amount in instalments, the banks are not supposed to disturb their customers.
On the contrary, the disadvantages that might surface during these debt settlements are: -

These programs are not easily applicable to all the customers. One needs to meet certain minimum requirements that include the total outstanding amounts and the months for which the payment had been pending. If the total amount is low, there are fewer chances that the negotiation will be good.
There are still chances that your credit ratings get affected due to this negotiation process. There are some terms and conditions in some debt settlements which do not cover all aspects of the unsecured debts.
After you enter into any debt settlement agreement, you should be very careful with the instalment repayments. Every miss in repayment might increase the rate interest and penalties manifold. Also the credit ratings might get influenced by these mistakes.
Overall, there are some disadvantages that are posed by this process, but keeping in mind the positive offerings of these processes, one can definitely take up this chance to eliminate debt.

It would be wise to not go directly to a debt settlement company but rather first visit a debt relief network. The top debt relief networks only allow debt settlement companies into their accredited organizations that prove a track record of successfully negotiating debts and have also been certified. They are free to use and offer helpful debt relief advice. [http://www.freedebtsettlementadvice.com]Free Debt Advice.

Article Source: [http://EzineArticles.com/?How-Debt-Settlements-Work-and-What-Are-the-Pros-and-Cons-Debt-Settlements?&id=3521958] How Debt Settlements Work and What Are the Pros and Cons Debt Settlements?

Before you can start to eliminate your debt you need to know exactly how much you owe and to whom it’s owed to. This doesn’t have to be a difficult process, a simple excel spreadsheet will do as seen below.

(Click to Enlarge)

*NOTE* You will notice that there is no mortgage listed above. While it is considered a debt, for your own sanity it’s best to concentrate on your smaller consumer debt first.

Getting Organized

Sometimes your credit card statements aren’t up to date, especially if you are continuing to add to them or are making more than one payment per month.

It’s important to call the number either listed on your statement or the back of your card and get the most recent balance.

You can organize your debts however you like, by monthly payments, interest rates or total by creditor. There is really no right or wrong way.

Know Your Numbers

Many people don’t know what their total debt is. Ignorance will almost always lead you deeper into debt. By being conscious of your debt and knowing what you owe you will be in a better position to stop it before it gets out of control.

Your Debt Plan

Now that you know what your total debt is, you can start to develop a plan to get it paid off as soon as possible. After all that is the goal right?

One of the most effective ways to eliminate your debt quickly is by utilizing a debt snowball. You can read more about how to properly use the debt snowball here.