Debt Elimination Tools

Being in debt can replace the fun of life with stress, and the larger the debt, the larger the stress will be as well. Developing effective personal tools to reduce or eliminate debt can help you to put your finances back on a stable footing. A key element in debt elimination is changing your spending patterns so that you don't replace the debt you've gotten rid of with a new one.

Written Budget

The first step in getting rid of a debt is to understand how you acquired it. To do this you need to develop an understanding of your earning and spending patterns. Carry a notebook with you wherever you go and write down the date, the item and the price every time you buy something. Maintain a comprehensive written record of your spending. After four or five months, you will have a useful record that you can refer to when you try to figure out where all your money went.

Friends

Use peer pressure to your advantage. Tell your friends, in no uncertain terms, you are committed to getting out of debt. Encourage them to challenge you if they see you slipping on this resolution. It's much more difficult to renege on a promise to yourself if you know other, are aware of it. Get your friends to help you in your debt reduction efforts by participating with you in low-cost, fun activities such as hiking, potlucks or going to free public events. If you have friends who are also having debt problems, you can band together in your efforts to eliminate your debts.

Envelopes

An envelope may not seem like a powerful weapon for attacking a large debt. However, used properly, envelopes can introduce a rational structure into what might be a chaotic financial life. Label a group of business-sized envelopes with all of the categories that you spend money on: rent, food, utilities, etc. For items that you purchase with a check, debit card or automatic withdrawal from your bank account, put a slip representing that amount into the envelope. Include an envelope for recreation and entertainment and budget a reasonable amount for these every month. When you empty the envelope, you get no more entertainment that month.

Personal Challenges

Set challenges for yourself that you know you can meet. As you meet each challenge, set yourself a slightly more challenging one. Achieving these goals will increase your self-confidence and your motivation to eliminate your debt. For example, if you spend $100 every month on coffee, set a personal challenge to reduce this by $10 every month. If you spend a lot on cab or bus fares, challenge yourself to walk to work once a week and put the money saved toward your debt. This challenge has the added benefit of giving you more exercise.