Debt has become a way of life for many people. The endless collection calls, the mounting piles of bills and growing list of negative entries on credit reports can have people thinking that it's impossible to overcome the amount of debt they owe. However, a little ingenuity and self-discipline as well as a plan of action can help alleviate and eliminate out-of-control debt.
Know Your Debt Balance
Gather all of your account balance statements. Record the balance due of each account and the contact information for each crediting agency. Obtain copies of your credit report from TransUnion, Equifax and Experian to find collections accounts that you may have overlooked and add those accounts to your debt balance list as well. Tally the total balance of all debt. Knowing the exact total of your debt will give you an overall view of how much debt you actually owe, as well as lay the groundwork for building a budget to reach your debt-elimination goals.
Pay Down Smaller Accounts First
Sort your account balances from smallest to largest and start paying down the account with the smallest balance first. The sense of achievement you feel after that first account balance has disappeared will motivate you to start tackling your higher account balances. If possible, try to send in an extra $50 to $100 in addition to the monthly minimum payment on the account to make the balance disappear faster.
Build a Better Budget
Budgeting will give you more control over where your money goes every month. The idea is to spend less money than you make, while saving money to pay down your debt account balances. Record your transactions for a month to find out where every cent goes. Review your purchases for the month and devise ways to cut down (or eliminate completely) unneeded spending. For example, consider carpooling to work whenever you are able to and make coffee at home instead of purchasing it at the coffee shop. After you have found ways to cut your spending, apply the money you've saved to pay off your debt account balances.
Don't Acquire More Debt
The key to getting out of debt, and staying out of debt, is not acquiring debt in the first place. Use cash instead of credit cards whenever you can. Using cash will save you the interest paid (and perhaps additional fees) on credit card balances. Never use credit cards to spend beyond your means. If the temptation to use a credit card is hard to deny, consider having your spouse or good friend hide your credit cards where you will never find them. Another option is freezing your credit cards in water in the freezer. By the time the cards have melted the desire to spend money may have passed.
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