The Best Way to Get Rid of Debt

Few things stand in the way of financial security more than debt. If left unchecked, it can cripple your credit rating, drain your resources to the breaking point and leave you casting about desperately for any means of recourse. Reducing your debt starts by sizing up the problem and developing a comprehensive strategy for addressing it. It takes discipline and hard work, but with the right amount of patience, it can be done.

Spending Habits

Getting rid of debt starts by eliminating all unnecessary spending. Go through your finances and cut out anything you don't need. Stop eating out and prepare frugal meals at home instead. Avoid going to the mall and don't make any purchases unless they're absolutely necessary. You can further cut your spending by purchasing a calendar and noting when bills are due; that keeps you from paying any late fees. It also helps to create a monthly budget---allocating a certain amount of resources for debt reduction---and then maintaining it until your debt is gone.

Credit Cards

Ideally, you should cancel all of your credit cards and cut them up when trying to reduce debt. If you can't do that, then try to consolidate the debt into a single card. Check to see which one offers the lowest interest rate, then transfer the debt on all the remaining cards to it. When paying off credit card bills, always pay more than you owe each month; don't just pay the minimum required. Develop a schedule for paying off your credit card bills and stick to it. Remember, interest rates on credit cards eat into your future income. The faster you pay them down, the less you'll have to pay on your overall debt.

Loans

You can tap into other sources of income in order to pay down a debt. If you own a home, look into a home equity loan in order to consolidate your various payments. Check your savings account or see if you can liquidate parts of a 401(k) or similar source of equity. If you have additional assets such as a vacation home or a boat, think about selling it; it costs you money to maintain them if you're letting your debt ride rather than liquidating them. Consider speaking to a family member about a loan; if they're able, they can offer you better rates than a bank or credit card company, and the interest goes to someone you care about instead of a giant corporation. If worst comes to worst, consider selling your house, moving into a smaller apartment, or moving to a city with a lower cost of living. The money you free up can then be applied to your debt.