Strategies for Getting Out of Debt

There are over 1 billion credit cards in circulation in the United States, so if you're in debt you're not alone. Getting out of debt isn't an easy task for everyone, especially if you're unemployed. Developing a strategy for getting out of debt is the first step towards a more sound financial future.

Create a Budget

Creating a list of your expenses is an important part of developing a strategy for getting out of debt. Write down what your expenses are and how much you spend on each item on a monthly basis. Analyze your budget and look for ways that you can reduce your monthly expenses. For example, you might choose to make instant coffee instead of going to Starbucks for a cup of coffee each morning. Eliminating expenses like dining out and using your cell phone are other ways to cut back.

Debt Consolidation

Debt consolidation isn't right for everyone, but is one strategy for getting out of debt. Debt consolidation involves taking out one loan to pay off all of your debts at once. Instead of paying multiple bills each month, you only have to pay one loan payment each month. This can help reduce stress in your life because you'll only have to deal with one creditor instead of having multiple creditors call your house every week.

Prioritize Bills

Deciding which bills you're going to pay off first will help you get out of debt faster and save money on interest rates. One strategy is to pay off bills with the highest interest rates first, which will help reduce the amount of money you pay in interest.

Cancel Credit Cards

After you pay off the balance on a credit card, you might want to consider canceling the card. This will help you avoid the temptation of using your credit card to make additional purchases that will put you back into debt.

Communicate with Creditors

Communicating with creditors is an important part of getting out of debt. Ignoring your creditors will only make your debt problem worse, according to Bank Rate. Creditors are willing to talk to you and can sometimes help develop a more affordable repayment plan. Sometimes creditors will even settle for taking a fraction of what you owe. If you ignore your creditors, your bills will get sent to a collection agency and then to a judge if you continue to ignore the collection agencies.

Try to Make Extra Money

Try looking for ways to make extra money by taking a part-time job at night or having a garage sale. The extra money you make each month can be used to pay off some of your debts.