What Is the Best Way to Pay Off Debt and Get Out and Stay Out?

Many struggle with paying the bills and wonder how to get out of and stay out of debt. The short answer is spending less than you earn, but that's not as easy as it sounds. Yet, budgeting wisely and living frugally will indeed get you out of debt, build your savings and forever end your money worries. Though the process may seem overwhelming, taking small steps will set you on the right path.

Instructions

1

Track your monthly expenses. Keep all your receipts for a month so you can begin to understand where your money is going. Tally it at the end of the month, separating into such categories as: utilities, rent, clothing, presents, entertainment and food. Make a note of payments occurring monthly and a few times a year.

2

Make a budget. Plan how much you will spend in each category. Some payments, such as rent or insurance, are fixed monthly expenses. Others, such as credit cards, groceries and utilities vary, so you have to estimate how much you can afford to spend. You may have to make some sacrifices, such as eating out less.

3

Reduce costs. Look for ways to spend less. For example, you may want to start using coupons when grocery shopping, reduce the number of your cable channels (or eliminate cable altogether) and turn off lights not is use.

4

Apply extra money towards your debts. The more money you allocate, the more quickly you will be out of debt. Stay focused on your goals to refrain from unnecessary expenditures.

5

Build your emergency fund. Even after you have paid your debts, maintain your frugal ways and put the extra into a savings account. If you ever have an emergency, like a medical problem your insurance will not cover, or a layoff, you can use this money instead of plunging again into debt.

6

Save for large purchases. Instead of going into debt for a large purchase like a new car or TV, save up first and pay cash.

7

Contribute to a retirement account. Use the 401K program if your company offers one. If not, you can save in an Individual Retirement Account (IRA). This ensures you will have a comfortable retirement and avoid debt.

8

Continue living below your means. Though you're out of debt, you will still want to budget your money, save and avoid debt.