How to Banish Debt

Many Americans these days struggle with debt, and if you're one of them, you may think you can never get out. Each month new bills come in while you're still struggling to pay off the old ones, and your interest rates may be astronomical. But there is hope. By making slow and steady progress with your debt, you can banish it forever, and even bulk up your savings in the process.

Instructions

1

Stop acquiring new debt. Do not put any unnecessary expenses on your credit cards, or take out new loans unless you have an emergency. For instance, financing a yearly vacation with your credit card is a poor idea; a medical emergency, however, is an acceptable expense. Pay by cash or check for all new purchases.

2

Examine your budget. List your monthly expenses one by one, and be completely honest with yourself. Decide which ones you can live without or pare down. Consider whether your lifestyle is unsupportable by your income. For instance, leasing a new car every year is an expensive venture, and should not require credit to maintain. On the other hand, car repairs that do not cost more than the current value of the vehicle may be appropriate if you require a car to get to work.

3

Set a new budget and stick to it. Make sure that it is reasonable based on the area where you live; some parts of the country are more expensive than others. Budget for a few extra perks to motivate yourself, but keep these to a minimum. Consider sharing expenses to save money; move in with a friend and split the rent, or host potluck dinners at home instead of dining out.

4

Call up your credit card companies and ask for a rate reduction. If you are a loyal customer and usually pay on time, the chances are good that you may be eligible for a low-interest transfer, or a rate reduction. Ask to speak to the customer retention center, and make sure that the reduction doesn't expire within a certain amount of time.

5

Negotiate with billers. If you have medical debt, for instance, ask to have it reduced, or work out a payment plan with the doctor or hospital. Explain how you are having financial hardship at this time. Most of the companies that you owe would rather see some of the debt paid off than none at all should you declare bankruptcy.

6

Pay off credit cards with the highest interest rates first. Do this for each card until you have no more debt left.