The emotional weight of debt causes stress and anxiety for the entire family. A difficult economic climate can make debt seem inevitable. Paying off debt lifts the burden from your shoulders, providing financial freedom which makes life more enjoyable. Choosing a frugal lifestyle for a short period of time allows the debt to be eliminated more quickly.
List Your Debt
Create a list of every outstanding balance you owe. Use a spreadsheet to organize the information into columns. Include columns for the name of the creditor, contact information, balance, interest rate and the minimum monthly payment. Add a column for special notes, such as an introductory interest rate that may be ending soon. Update your list each month to reflect the amount paid and the new balances. Use the list as a visual reference and motivator to continue paying off the debt.
Spending Habits
Change your spending habits to prevent more debt. Avoid taking on any new debt in any form. Track your spending for a month to determine where you're spending your money. Use that information to devise a workable budget for your finances. Include all sources of income, as well as all monthly expenses. Consider paying with cash to help stick to the budget. Withdraw only the amount outlined in the budget for expenses such as groceries, entertainment, gas and dining out.
Prioritize Your Debts
Focus on paying one card off at a time, putting any extra money toward that card. Refer to the list you created showing the money owed. Prioritize the list to determine the order in which you will pay off the credit cards. Consider all factors when determining the order. Focus on credit cards with special financing terms that may soon end. Pay off these credit cards before the special financing ends to avoid extra interest or fees. Some experts recommend starting with the lowest balance, paying it off quickly so its minimum monthly payment can be applied to the next lowest balance. Others recommend starting with the debt holding the highest interest rate. Consult with a financial adviser for further advice on how to prioritize your debts if you are unsure how to proceed.
Extra Money
Focus on finding extra money to put toward your debt. Review your budget to find areas that can be cut or reduced. Consider taking your lunch to work instead of going out to eat, shop clearance racks instead of buying clothes at full price or take the bus instead of driving the car. Pick up extra hours at work or take on a second job to provide extra money until your debt is paid. Develop a frugal lifestyle which will allow you to pay down off your debt quickly.
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