How to Get Out of Debt
How to Get Out of Debt – Some Easy Simple Tips
Debt Free. For some it sounds like a fantasy but millions of Americans are living the dream of becoming debt-free and you can too! Find out how easy it can be by using these quick tips:
- Know What You Owe. The first step is to determine how much debt you owe. Schedule a quiet time to sit down with all of the bills then write down the total amount owed, minimum monthly payment and interest rate. Add up the total amount of debt and how much you are spending to service the loans each month.
- Calculate Assets. Next, determine how much money you have to put toward paying down debt. It could include a big bonus or tax return, garage sale proceeds or money remaining at the end of each month.
- Start Small. Nothing is more motivating than the taste of success so start with your smallest debt first. Put all extra money toward repaying that debt while continuing to make the minimum monthly payment amount on all other loans. Once the smallest debt is paid in full, add the amount of the monthly payment toward the pay-off of the next debt. When the second smallest debt is paid in full then add that monthly amount to the next and so forth. If you are like most people, you can be completely debt-free (including the mortgage!) in five to seven years! An alternative version is to pay down the highest interest rate loan first. Do the math to determine how much extra money you have to dedicate toward debt repayment to decide which method is right for you.
- Consider consolidation. If you simply don’t have additional money to spare then consider a consolidation loan to get your expenses under control. Once you are able to afford the regular payments then begin paying additional amounts to reduce the principle.
- Stop Shopping! Don’t buy more than you need and stop using shopping as entertainment. The best budgets and payment plans won’t work if you continue to spend. Set aside an emergency fund for unexpected repairs then replace the shopping habit with healthy activities and goals.
- Go Public. Get the family involved and let others know your intention to become debt free. Not only will the public declaration make it harder to back out later but friends and family will be more understanding about money issues. You might be surprised to find how relieved they are to skip expensive dinners and have a backyard BBQ or limit holiday gift giving to something more manageable.
- Keep it Real. A recipe for disaster is to try to cut back on everything and do it all at once. Keep room in the budget for what matters in life – just opt for more affordable versions. For example, instead of taking an expensive family vacation try camping or replace dinner and theater with a rental and pizza delivery. It doesn’t have to cost a lot to be fun and meaningful.
Debt free is more than having more money to spend at the end of the day – it’s a lifestyle that allows you the freedom to spend more time with friends and family while creating the life you love.
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