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how to get out of debt 1

Updated on May 16, 2009

How to get out of debt

There is only one way out of debt: Having more money coming into your wallet than going out of your wallet. Actually, this hub could stop right here. But than a lot of you would just try to find the next get quick rich scheme and think that's the easiest way out of debt. Unfortunately it is often the way even deeper into depth. Instead please keep reading, I promise you that I will not to try to sell you an e-book, nor will I ask for your email address and best of all you don't have to spent any money at all! Just invest a few moments to read this hub and it may help you to find the way out of personal debts.

The journey back to financial health starts with one single step

Determine your starting point. Debt often occurs when people have lost the oversight over their finances. They live from moment to moment, digging one hole to fill another. Take a step back, put all this ugly paper work on the table, print out your bank statements, find all these letters that demand money etc etc etc Put it all on the table and start to make two lists. One list for money coming into your wallet and one for going out of it. Try to make these lists for at least the last 6 months, better even for the last year. It is a lot of work and it can be really frightening, but if you ever want to lead a fear and debt free life again that is the only point you can start. At the end you should be left if the two lists to work with, let's call them the Income and the Spending List.

Income List

Mark all your reliable income like your base wages, rent you receive for a property, benefice form the state and count it together. This should show the stable income that you can rely on to have each month. Mark your irregular income also, this refers to overtime you worked, additional jobs, freelance work you did and the like. Your income list is now done, it should show two sums: a) What you had coming in regularly each month in the past, and most likely will have coming in in the future and b) what kind of additional income you had over the last 6-12 months and what could also provide additional income in future.

Spending List

Mark all items that are absolute essential to pay like your mortgage or rent, your insurance, everything that you have, really have to pay and that is a fixed sum. Than mark all items that you have to pay and where the money you have to pay varies or could vary, for example credit card bills. Third look at the things that are leftover and try to organize them in groups. Essentials like food go in one, non essentials like cinema tickets go in the other.

Result

I know that is all hard work and most likely you will have a lot of headache at the end of it. But now you should have an overview over the last 6-12 months, how your financial situation really is, where your money really goes to, where you can improve your income and where you can reduce your spending. These lists show you the realistic possibilities you have to get out of debt by increasing your income and reducing your spending and where to do that.

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