- Personal Finance
Ideas For Getting Out of Debt
Many people find themselves in debt and are unsure of how to get out from under what they owe. If this sounds like you, it is important to take steps to get out of debt to increase your financial success. Here are some tips for debt reduction and elimination.
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1. Don’t add to your debt.
If you want to eliminate your debt, the most obvious (but often difficult) step is to not add to your existing debt. The easiest thing to do is to cut in half all of your credit cards that are maxed out. Then cut in half all of your remaining cards (including department store cards, benefits cards, etc) except one. You will use only one credit card for items that are necessities.
2. Track your spending.
Many people who find themselves in debt got there largely by not knowing where their money is going. A key to getting out of debt is to know what you spend your money on. The easiest thing to do (although it may seem annoying at first) is to write down everything you spend your money on—even if it’s only a few dollars. Once you have a good view of where your money is going, it will be obvious where you can cut expenses. Plus, if you know you have to write down every purchase you make, you will be less likely to make unnecessary ones!
3. Prioritize your expenses.
Some things that you spend money on are more important than others. Food, for instance, is probably more important than a new clothing accessory. Categorize your expenses into three groups: “Must have” (like food, medicine, rent, or utilities), “Should have” (like clothing for work or house maintenance), and “Like to have” (entertainment, meals out, or cable). Take a look at the “Should have” and “Like to have” categories to see where you might be able to cut expenses.
4. Pay more than the minimum required.
When making payments to pay off your debt, always try to pay more than the minimum. By paying only the minimum, you are lengthening the amount of time it will take you to pay off your debt and increasing the amount of interest you will pay on your debt. Discipline yourself to pay more than the minimum each month, even if it is only $5 more. Be sure that when you put together a spending budget, you include a budget amount for debt reduction.