Advice About Getting Out of Debt

Although the process of getting out of debt is not necessarily fun because it requires that you live within your means, the reward is well worth the effort. When you are debt-free, you can use your income in the ways you want instead of being tied to your debt payments. Keep your eyes on the goal as you develop a plan to get out of debt.

Face the Debts

Being in denial about how much you really owe is not going to help you get in a position to get out of debt. Face your debts by making a list of every debt you have, from the mortgage down to the money you borrowed from a friend to buy a candy bar. For each debt, list the total amount you owe, the interest rate and the minimum monthly payment. Add up the minimum monthly payments on all the debts to find your total monthly debt payment.

Develop a Realistic Budget

To get out of debt, you need to stop spending more money than you earn. In addition, you have to factor your debt payments into your spending. Create a realistic budget of how you plan to spend your take-home pay each month. Start with the necessities, including your housing, utilities, transportation, insurance, groceries and total monthly debt payment. Allocate the rest of the money toward luxury spending, such as new clothes, eating out and buying gifts for people. Stay within your budget by setting aside cash out of each paycheck and not spending any more money after you run out of cash.

Make Extra Payments

As you pay down your debt, your minimum payments will decrease. Use the extra money you set aside as your total monthly debt payment to make extra payments toward your debt with the highest interest rate. In addition, use unexpected bonuses from work and your tax refund check to pay off debt rather than making unnecessary purchases. If you have time, get a part-time job or sell belongings you don't need to earn extra money to put toward debt payments. Making extra payments helps you get out of debt faster than you would just making the minimum payment. Plus, it saves you money on finance charges.

Seek Support

If you know somebody else who is struggling with debt, support each other in the process. Your friend can also keep you accountable for sticking to your plan and not getting deeper into debt. Meet regularly to share the tricks you are learning to cut your expenses so you can make more monthly payments. You can even start a friendly competition to see who can save the most money each month to put toward getting out of debt.