While debt can seem insurmountable with its endless payments and high interest rates, if you apply yourself diligently you can eventually eliminate it. Getting out of debt requires a plan of action and the appropriate tools. Once you make a commitment to your goal of wiping out debt, it's only a matter of time until it becomes a reality.
Create a Budget
Determine how much money you spend each month on your living expenses and bills. Add up the amount of your fixed expenses such as your mortgage or rent, food, insurance, car payment, utility expenses and phone bill and subtract it from your take-home pay. Note the amount of money left over after you pay the necessities and take a close look at areas where you spend money on things that aren't a necessity, such as take-out food, music downloads, new clothes or items for your home. Create a small budget for these type of things and stick to it. If you normally, stop at the drive-through and buy a coffee every morning, limit it to once a week, or make coffee at home and put it in a travel mug for the drive to work. If you have any money left over after budgeting for non-essentials, apply it to your debts.
Stop Using Credit Cards
You can pay off your debts much more quickly if you stop using your credit cards and use only cash. MSN Money recommends that you allot a specific amount of cash each month for non-essentials. Once you spend the cash, you wait until the next month to buy anything that's not necessary. Once you stop making new charges on your credit card, you will have less debt to pay off. If you choose to pay double your payment each month, the debts will disappear faster. If you can't afford a payment equal to double what you normally pay, pay as much as you can. Anything will help reduce the debt.
Contact Your Creditors
Call your creditors and ask for an interest rate reduction on your credit accounts. If you have made your payments on time, your creditors may offer you a better rate. This could save you a substantial amount of money.
Don't Apply for New Debt
To truly get out of debt, you can't take on new debt. Even though creditors' offers tempt you, avoid accepting them. The more debt you acquire, the longer it will take you to eliminate it. If you want to make an expensive purchase, wait until you have enough money in your savings account to do so.
Get Credit or Debt Management Counseling
If you need help organizing a budget and adhering to it, contact a reputable credit counseling agency or an agency that offers debt management plans. Credit counselors can help you budget your expenses and offer helpful budgeting advice. Debt management plans involve a third party, the debt management service, that pays your creditors each month with money that you deposit. The Federal Trade Commission warns consumers to check out any credit counseling or debt management service before enrolling.
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