How to get out of debt and save money

Getting out of debt is not that difficult if you approach it on a one-step-at-a-time basis. Do the first thing, then the next, and pretty soon you will find that not only are you saving money, but you are coming closer to your goals of being debt free.

There are several, logical steps to take in order to get out of debt. If you follow them, carefully, one at a time you will eventually be out of debt and living in control of your money rather than your money being in control of you. But you have to be honest with yourself about where you are. No more hiding the bills without looking at them, or buying something because you have been "good for a whole week. "

Ready?

Get out all of your bills. You need to take an inventory of where you are right now.

Write down and add up the value of all you own; house, cars, stocks, insurance-everything. Now add up the value of all you owe- mortgage, credit cards, loans-everything.Subtract what you owe from the total value of what you own. The result is your net worth.

Let's say your posessions add up to 300,000. but you owe 200,000. on your house and 50,000. in credit card debt. Your net worth would be 50,000.00. This means if you sold everything you had you would still have 50,000.00 to your name.

On a piece of paper write down all of your income. Your salary, your blogging money, adsense, stock dividends, eBay money-whatever it is and where ever it comes form account for it.

Now, list all of your expenses. House, insurance, electric, water, gas, car payment, medical insurance, groceries...whatever expenses you have on a monthly basis- list them. If you have yearly expenses divide them by 12 and add the total in as a monthly expense. If you pay 1200.00 a year property tax then add it as 100. per month.

Do not add expenses like eating out because you may need to give that up for awhile.

Compare your income to your out-go. If you have more coming in than going out you are a step ahead, congratulations!

Now make a realistic budget, listing all expenses that you have to pay every month. Stick to your budget, it is the road-map to being financially free.

The first thing that needs to be done is you need to set up a savings account. You need to have at least 1,000.00 to 1,500.00 in savings to cover emergencies. Eventually you want to have 3-6 months salary in there but for now shoot for 1,000.00.

Retire the credit cards.

You are not going ot use them again. Ever. You will not need them. You are going ot handle money so well you can pay cash for most things and use one credit card for online purchases that you can pay off at the end of the first billing period. You have cash in savings to cover emergencies.

You are going to pay the minimum on your credit card bills and put as much as you can into savings until you have 1,000.00. This money is not for a vacation and it is not for a down payment on a nicer car. This money is for emergencies. If your water heater breaks, or your transmission goes out you are going to withdraw enough to pay for the repair with cash. Once you withdraw the money you have to concentrate on getting it back in there are soon as possible.

As soon as you have 1,000.00 in the bank stop putting anything in savings. Use that extra money to apply to your smallest credit card balance. Pay it off. Now, Take the money you were paying on that credit card and apply it to the next largest balance. Pay that one off. Repeat, using the funds you are freeing up to pay off the next card.

If, at any time during htis process you have to use the money from savings go back to making all minimum payments until your savings account is built back up, and then return to your debt reduction plan.

Why do you need the newest car, the newest electronics, the designer outfits? Learn to buy smart. Spend money on small amounts of quality items that will last rather than small amounts of money on large amounts of junk that will be gone. Teach your kids to enjoy simplicity and learn to enjoy it yourself. Rethink what things are really essential in your life.Rather than using electricity and spending money on video games what if your family sat down to a bowl of popcorn and a game of Monopoly?

Consider buying used cars rather than new. In fact most of what you buy new can be bought used for a fraction of the cost. My kids wear designer clothing but it comes form thrift shops and garage sales. I collect antiques but I find them in those same places, as well as by the trash on trash day. Make it a game to be frugal.

Being frugal is not the same as being stingy and cheap and don't get the two confused. Being frugal gives freedom, being stingy and cheap makes you a slave every bit as much as debt does.

Negative Income means that you make less money than you spend. Your bills are more than your income.

You can deal with this in a couple of ways.

1. Find a second income- Sometimes working a second job for a short period of time is enough to get you over the hump.

2. Get rid of stuff- eBay your extra stuff, or have a garage sale. Take a look around at what you have and see if you can sell it. If so use the money to cut your debt.

3. Talk to your creditors and work out a repayment plan. They are usually willing to do this and can cut your monthly payment so you can afford to pay your bills.

During your repayment phase you are going to try not to spend money that you don't need to spend. Don't grab a hamburger at McDonalds, stop getting your nails done, hold off on the new dress. Like losing weight, losing debt just feels good.

Don't go back there. Like over eating or smoking, debt is a trap.

Once you have your debt paid off use the money you were paying on credit cards to build up a savings account and financial security. Invest in real estate, stocks, or whatever stikes your fancy but do it responsibly and with good research. Pay cash and never buy what you can't afford today. Save up for it.

You will be free, and no matter what the world economy does you will be secure.