How to Eliminate Debt Fast Without Bankruptcy or Debt Consolidation

Regardless of the hype regarding debt elimination, there is no secret government grant or program that eliminates your debt, unless you're considering bankruptcy. Eliminate your debt without resorting to debt consolidation or bankruptcy with budgeting, careful planning, and most of all commitment. The quickest path to financial freedom involves a common sense approach to spending less. Ideally, you will be able to reduce what you owe by budgeting and restructuring your finances, without taking that second job.

Instructions

Budgeting

1

Write down your income and subtract your monthly expenses from the total. Tally everything from gas money to the grocery bill. If you're like most people, you'll notice a discrepancy between what you have left at the end of the month on paper and how much money you have in the bank. Don't make any cuts to your budget right now; just be honest about how much you're spending.

2

Review the expenses you've compiled to find where your money goes. If you're serious about financial freedom, you need to take a good look at unnecessary spending. Eating out, entertainment, monthly subscriptions and impromptu shopping trips are just some of the purchases that will hurt your budget. Cut out or cut back on these expenses by paying yourself an "entertainment fee" in cash each month. Avoid reaching for your debit card when the mood to spend hits.

3

Discover money you didn't know you had. Many people are paying for extra services they don't use or don't need. If you're paying for banking services, switch to a free checking account. Talk to your banker about refinancing your mortgage. Call your insurance agent and request a lower rate, or consider changing companies. Avoid leasing cars, as this agreement leaves you with nothing to show for it at the end of the lease. Rethink your phone plan and change it to a lower one if you don't need the extra perks or minutes. Call your creditors and ask for lower interest rates. They may not agree, but they won't do it at all unless you ask.

Paying off Debt

4

Set your goals. You've found out where your money is going and located unnecessary spending. It's time to rewrite your budget and use what you have left to reduce your debt. Unless your income varies each month, the amount you have set aside for debt reduction should not change. Think of it as another bill that must be paid.

5

Choose one debt, and begin making extra payments while paying the minimum on other accounts. Aim for the loan with the highest interest rate. Don't spread extra payments over several debts.

6

Use the same technique to pay off the next loan once the first debt is paid. Pay the same extra payment plus the minimum from the prior account. This is called the "snowball effect", and works much like compound interest in a savings plan. It gains momentum and speeds debt reduction by applying more to each debt as others are paid off.