By Carol Ferguson

Americans are $2.45 trillion dollars in debt, according to the Federal Reserve's G.19 report on consumer credit, released July 2011. And the average Canadian family is dealing with $100,000 in debt and owes far more than it earns, according to a new report from The Vanier Institute of the Family.

Many divorced people think that because they are managing to pay their bills and nobody is knocking on the door to take their stuff away that they are not in debt. Think again!

To find out if you are in debt, you must calculate your net worth. You do that by taking all your assets and subtracting all your liabilities.

NET WORTH CALCULATOR

Financial Asset Examples

• Life Insurance

• Bank Accounts

•  Retirement Accounts (RRSP, RIF, 401K, IRA, SEP)

• Company Pensions

•  Mutual funds

•  Stocks

•  Bonds

•  Guaranteed Investment Certificates (GIC)

•  Tax Free Savings Account (TFSA)

•  Cash (CDs, money market funds)

•  Non RRSP investments

• Pension/LIRA

• Other

Personal Asset Examples

• Boats and other recreational vehicles

•  Home

• Vacation Property

• Furniture and Appliances

•  Art

• Jewelry

• Collectibles

• Vehicles

• Other

Non Financial Asset Examples

•  Real Estate

• Business Ownership

• Other

MINUS

Liabilities Examples

• Line of Credit

•  Car Loans

•  Credit Cards

•  Home Mortgage

•  Mortgage on Other Properties

•  Student Loans

• Home Equity Loan

•  Cash Advances

•  Taxes Owed

•  Medical Bills

•  Alimony Owed

•  Child Support Owed

Now, if your assets minus your liabilities is a positive amount, you are in good shape! If your assets minus your liabilities is a negative amount, you are IN DEBT!

What is Debt?

As per Merriam-Webster dictionary, debt is an amount of money that you owe to a person, bank company, etc. It can include the amount borrowed and interest accumulated. Debt can include credit card debt, mortgage debt, car/truck debt, student loans etc. According to money-zine.com "Based on the 2010 Census statistics, that works out to be nearly $7,800 in debt for every man, woman and child that lives here in the U.S."

5 Tips To Get Out Of Debt

You can get out of debt if you are committed and diligent. It may take a while and if you stay focused on your goals, the rewards will be worth it. Here are a few tips that can help. Pick one, two, three or all four. The faster you work at this, the faster you will succeed.

1. Prepare And Stick To A Budget. A budget is a way to control your expenses. Since you have little control over the amount of money that comes in, you have to control the money that goes out.

• List all your current income streams

•  Make a list of all of your monthly expenses

• Compare your income to your expenses.  

• Stay on budget and avoid any new debt.

2. Cut Up Your Credit Cards. One way to get out of debt is to stop using your credit cards. The easiest way to do this is to simply cut them up. Once you are out of debt and have learned how to better manage your money, you can apply for a new card. And then, you will get a better rate because you are debt free!

3. Lower Your Interest Rates. Nowadays, credit cards have unbelievably high interest rates and you end up paying more in interest than the original amount you borrowed. You can get credit card companies to lower their interest rate. You just have to call and ask.

On a $5,000 balance, if you paid $150.00 per month, with 20% interest, it will take you 50 months to get rid of your debt and you will pay $2,359.09 in interest. However, on a $5,000 balance, if you paid $150.00 per month with 16% interest, it will take you 45 months to get rid of your debt and y ou will pay $1,656.82 in interest. That's $702.27 less!

And talk to your bank manager about the interest rate on loans and mortgages. If you don't ask, you will never get, as they will surely not offer. Check out the different kinds of mortgages to see which one is better suited to your current situation. Ask about Variable Rate vs Fixed Rate Mortgages.

4. Double Up On The Minimum Payments. It is amazing how much you can save by this one tip alone. For example:

• Pay the minimum on a $5,000 debt and it will take you over 300 months to get rid of your debt and y ou will pay over $9,194.47 interest.

• Paying double the minimum on a $5,000 debt it will take you 120 months to get rid of your debt and you will pay $2,445.32 in interest. That's 180 months (15 YEARS) and $6749.15 less!

I know you will tell me that you continue to have balances on your credit card because you usually don't have any free cash left after you pay all your bills and the minimum credit card payments. You must review your budget every month and find expenses that you can cut out. Every time you can do this, use the extra money to double up the minimum payment of the credit card with the most debt. Once that card is done, then do the same for the next card etc.

For mortgages, consider making bi-weekly payments instead of monthly payments. Take a look at this example: You have a $200,000 mortgage with a fixed rate at 7%, 30-year term. If you have a bi-weekly mortgage payment, you will save a total of $68,925 in interest as opposed to making one payment a month.

5. Debt Counseling. If you are overwhelmed with the very idea of getting out of debt, there are many companies that offer debt consolidation and debt relief plans and counseling to help you. They can help you avert bankruptcy and be free of collection agencies. They can get you down to one monthly payment for all your debts.

For access to Free Money Tools, articles and more that can help you manage your budget and your debt, go to http://www.lifecontinuesafterdivorce.com  Because we all deserve to be financially free.

Carol FergusonAbout the Author

Carol Ferguson is a divorced mother of 2 wonderful children. She worked many years for a large corporation and is now an entrepreneur with a number of businesses, a house that is paid for, an abundant retirement savings plan and many other financial freedoms. Carol helps people who have gone through, or are going through, divorce, where they are now the single head of the household and need financial help. She gives hints, tips and advice on how to easily manage your daily finances to enable you to pay your debts, save for your future and become financially free. Visit her at http://www.lifecontinuesafterdivorce.com 

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