The Long Road Out of Debt

"Some debts are fun when you are acquiring them, but none are fun when you set about retiring them." Ogden Nash

According to statistics on CreditCards.com, total US consumer debt reached 2.46 Trillion Dollars in June of 2007. You know that Rolls Royce Phantom you see rappers driving? They cost $240,000 and Americans currently owe creditors over 7.2 million for them. In case you don't like reading fine print, US Consumer Debt doesn't include home mortgages.

After graduating college in 2006, my '92 Saturn died. Armed with my first ever full-time paycheck (you mean you're going to give me $980? twice a month?! I'M RICH!!!) I bought a new car, ignoring that voice in my head saying buy used or lease. In spite of my business degree and more than competent math skills, I believed I could overcome the 9.9% financing rate, 6 year lease term and $370 monthly payments for a new mid-sized sedan.

Six months later, Student Loans kicked in. One year later, I had the same salary, several speeding tickets, the worst car insurance rates known to man and mounting credit card debt. How does one climb out of such a steep hole? By knowing what works, and what doesn't.

1. Get a New Job. Yes, this means you. I know, I know, you really love your job and your coworkers are so cool and the girl in sales is hot and you think she likes you. Assuming you're a college grad, you really should know better. Not only is the money not helping you, but the hot sales girl was probably flirting with you because she needed to borrow your stapler, so cut the daydreaming. No matter how much you love your job, if it isn't paying the bills, it isn't worth it.

2. Consolidation is NOT the Path to Enlightenment. Sure, it sounds great on the radio. That guy in the commercial said it solved all his problems, just go to this website and they do it for you right away! No Problemo! Well, it is a problemo. Most debt consolidators fail to mention that while they will buy your debt, they won't necessarily refinance it for you. And, even if they do, follow this golden rule: never do anything financial that advertises on the radio. Repeat that aloud as many times as it takes to sink in.

3. Free Credit Report.com If you don't know your credit score, you should. As painful as the commercials are, FreeCreditReport.com actually does give you a free credit report... dot com. Of course, if you know your credit score you’ll know if banks and lenders are trying to scam you while you try to refinance high-interest loans. Speaking of which…

4. Refinance High-Interest Loans. ESPECIALLY car loans. Specifically, HSBC Auto Loans, Capital One Auto Finance and Wachovia Dealer Services are great banks for this. If you make all your payments on time and have good credit, chances are you can cut a decent amount of your APR. Even if month-to-month gains in terms of payments aren't what you’re hoping for, you can save a lot over the life of your loan. This is important because:

5. Nobody gets out of debt immediately. Everyone’s looking for a quick fix, but when you have deep debt there’s no get out of jail free card and believe me, I've tried them all. Winning the lottery is unlikely, casino gambling doesn't work and prayer generally proves ineffective in the war on debt. Although I have an audition for Who Want's to be a Millionaire scheduled for June 30th, so who knows? Let’s be realistic, getting out of debt can take years. Which leads me to my final point:

6. You Don't Actually Have to Save Money Right Now. There is a popular line of thinking that says if you aren't saving for retirement by your 30th birthday, you're screwed for life. Frankly, it's a good point. However, saving money has to be done the smart way and, if you're in debt, it may not be advisable to open a savings account. Why? Simple math. Capital One Bank, for instance, recently lowered the APR of their online savings account from 3.75% to 3.5%. I currently have a credit card with an APR of 7.9%. So if I have $1000 to either pay off a credit card debt or open a savings account, it’s financially wiser to avoid paying 7.9% than it is to collect 3.5%.

Getting out of debt is a commitment. Many of us leave ourselves swimming in debt, pay the minimums on everything we owe and never gain the elusive financial independence offered by Matthew Lesko's Suit. Dedicate yourself to repay everything bit by bit. It’s is the only way to go- unless, of course, you win big on a game show.