You may find yourself falling into debt as a result of unemployment, ill health, compulsive spending, a job that doesn't pay enough or any combination of these factors. The best techniques for getting out of debt and staying out depend on your situation and on what events caused you to fall into debt in the first place.
Tame Your Credit Cards
If credit cards are a major element in your debt problem, you need to deal with them first. Credit cards usually feature very high interest rates, so are much more damaging to your budget than a mortgage or personal loan. Begin by radically reducing your credit card use so that the debt doesn't get any worse. If possible, take a personal loan from the bank at a lower interest rate and use it to pay off the credit card debt. Once you have eliminated the debt, begin paying off your credit cards every month so that you don't pay any interest on them.
Make Money
This solution is easier said than done, but it is very effective. Finding a better paying job, or starting a business that becomes successful, are very effective ways of removing debt because they provide you with the money to pay it off. Analyze your employment situation. Consider returning to school to increase your qualifications. Ask your boss for a raise. Look for a higher paying job. Take on another job. Any of these solutions will help to increase your income.
Keep Track of Your Budget
Knowing exactly how much money you are bringing in and how much you are putting out can help you to regain control over your finances. Particularly if your debt is based in whole or in part on compulsive or out-of-control spending, keeping a budget can help you to train yourself to change your spending habits. Keep a record in a notebook that you carry wherever you go. Whenever you spend money, no matter how small the amount, write it down in the notebook. This will help to break the habit of spending money without thinking about it.
Live Frugally
Reducing your expenses and applying the money you save to paying down your debt is an effective way to improve your financial situation. If you are in the habit of taking expensive foreign vacations, stop. If you are a smoker, quit. If you spend $5 every morning on a latte and a croissant, start making your coffee at home and eating grocery-store muffins. All of these changes, when added up, can make a substantial difference in the amount of money it takes to keep you going.
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