| How to Start Getting Out of Debt in 3 Simple Steps |
Having debt is normal these days but that doesn't mean it has to be accepted as such. It should be every persons goal to be debt free as soon as possible but one can be forgiven for thinking that it being so could never be accomplished at times, especially when it is a struggle just to make minimum payments.
These three steps, although they won't clear your debt overnight, will certainly get you back in control of your finances and will start saving you money and reducing your debt very quickly.
Step 1: Listing Your Debts
In order to start getting your debt under control you must first understand how much debt you have and with whom that debt is with. One of the most problematic debts that people have is credit card debt and it is usually this debt that causes the biggest shock when the total debt is calculated.
It is normal for individuals to unconsciously, and often purposely, avoid compiling this list as many are frightened about finding out the extent of their debt problem. However, compiling a list is a necessary step and one has to overcome those fears.
When compiling the list you should note down the name of the debt, the type of debt (credit card, store card etc), the outstanding balance, the minimum payment, number of payments remaining, and interest rate.
There are conflicting views on the best way to arrange this list for priority repayment, some saying to prioritize debt with the fewest number of repayments and others to prioritize debt with the highest interest rate. Both methods have their plaudits but for this method you should list your debt by interest rates; high at the top of the list and lowest at the bottom.
Step 2: Pay off debt with the highest interest rates first
This step is quite simple; prioritize clearing the debt that has the highest interest rate. In order to do this you must increase your monthly payment to the maximum that you can afford as continuing to make minimum payments will do nothing but keep you in the card provider's 'debt trap', plus you will never get rid of your debt!
Once you have paid off that debt shift the funds that were being used to pay that bill over to the debt with the second highest level of interest and so on, until your debt is cleared. Now, it may the case that you will struggle to increase the amount you pay on your debt if that is the case then you need to find a way to free up cash in order to do so, and this is where step 3 comes in.
Step 3: Living cheaply or 'frugal' living
Whilst you are in debt it is a good idea to look at your spending and how you live. It is amazing how much money people waste on unnecessary items each month and how much we all waste on utilities, transportation and stupid things such as take out coffee!
It would not be too difficult to find an extra $200 a month by making cutbacks and being more efficient with our energy use, but whatever you manage to find it can be piled into paying off that first debt.
Needless to say, you should refrain from using any credit cards you have or from applying for any further credit. Every cent you manage to save and put towards debt repayment will lessen the time you are debt free. Getting out of debt is never as easy as getting into debt, but with considerable effort and no small amount of self discipline it can be achieved and in a lot less time than you may think!
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Article Source: UnArchived Articles
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