Consumers struggling to make bill payments, find a home loan or those facing foreclosure can feel as if they will never be able to get free from the crushing weight of debt payments. While getting out of debt requires planning and discipline, there is nothing that prevents you from developing your own debt payment plan and sticking to it.
Finances
To become debt-free, you must first have a good understanding of your financial position. You should gather all your financial information together and carefully determine how much you owe and how much money you have to spend. Only by knowing exactly what your obligations are and what funds you have available to pay your debt can you get a better understanding of the tactics you will need to employ to become debt-free.
Habits
A key part to understanding your debt is knowing what your spending habits are. The only way to make money is to either increase the amount of money coming in or decrease the amount of money going out. If you can't, for example, get a new job with a higher salary, you can effectively increase your salary by spending less. Determine where your money goes every month and how much of that you can reduce by saving or cutting back on discretionary spending.
Payments
Far too many borrowers get by every month simply by paying the minimum monthly payments on their credit card or other loan obligations. Paying only the minimum amount required each month will leave you with less money available in the long run. Only by paying more than the minimum required amounts can you get out of debt sooner and have more cash in your pocket.
Payment Strategy
"The Motley Fool" recommends consumers pay off the debt with the highest amount of interest first. For example, if you have three credit cards, you should make the minimum monthly payments on the two cards with the lowest interest rates and use the rest of your discretionary funds to pay off the highest interest rate card first. Once you have one debt paid off, you can then use the additional money to address the next highest debt and so on.
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