How to Get Out of Hopeless Debt

Debt can really weigh you down, emotionally as well as financially. If you've been stuck in a cycle of debt, you undoubtedly want to be debt-free, but you may fear that there is no way to get out of hopeless debt. If you reign in your spending, you will be able to get out of debt, even though it seems like it's never-ending. The key is to always apply as much money as you can towards paying off your debt.

Instructions

1

Take stock of your debts and income. You should learn where you really stand when it comes to the money you make and the money you owe. Gather all of your debt statements and add up the total. Pay attention to the interest rates on your debt--the higher the interest rate, the harder it can be to pay off.

2

Track your expenses to find budget leaks. Every day for a month, write down where you spend money. When you look at this statement at the end of the month, you'll probably be surprised at the amount of money you spend on unnecessary items, such as a daily snack from the vending machine at your work. Tracking your expenses allows you to see where you can make changes to your spending habits.

3

Choose which debt to pay off first. Rather than paying equal amounts towards all of your debt, you should pick one bill to pay off first and pay extra money towards that one, while making the minimum payments on others. Choose either the debt that has the highest interest rate--which will save you the most money--or the debt that is smallest--which can give you feel more satisfied from paying it off.

4

Reduce expenses and increase income. Cut back on your frivolous purchases so that you can have more money to pay off your debts. You can also try to increase your income by selling things that you don't need or doing odd jobs for people in your neighborhood.

5

Focus your extra money on paying off the chosen debt. Be sure that you actually apply the money that you save from decreasing your expenses and increasing your income towards your debts.

6

Roll extra money into the second debt when you finish paying off the first. This creates a "snowball effect" that allows you to pay off all of your debt quickly. For example, if you were initially paying $200 towards this highest interest debt, and $20 towards each of your other debts, you'll be able to pay $220 towards the second debt once you've paid off the first and $240 towards the third once you've paid off the second.