5 Easy Steps to Getting Out of Debt
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5 Easy Steps to Getting Out of Debt

Posted on Wednesday, February 15th, 2012 at 4:51 pm
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No one wants to find themselves in financial debt. Unfortunately, many people find themselves in debt each day. Personally, I find myself feeling overwhelmed when I find myself in any sort of debt. Oftentimes when I am overwhelmed by something, like a large amount of debt or a seemingly impossible to-do list, I go into denial. Of course, denial doesn’t actually solve any problems, which is why I am going to walk you through 5 easy steps to getting out of debt. This step-by-step process has helped me overcome my debt and regain control of my finances.

Getting out of debt is a lot like completing a marathon.  When you’re just beginning, the road ahead can be daunting. That is why the key to successfully getting out of debt is breaking the big issue (in this case, your debt) down into smaller steps that can be accomplished day by day.

  1. First you will need to take a close look at your overall debt. How much debt do you actually have? How much are you paying in order to carry this debt (i.e. interest rates)?
  2. Next, you will need to take a close look at your spending habits. How much are the “extras” costing you?  Where can you cut back on?  Stop spending money where it isn’t necessary. Instead, put the savings toward paying down your debt.
  3. Now that you have taken a good look at your debt and spending habits, you can begin to implement a proactive plan. Start by setting goals. Decide how much debt do you want to pay down each month. Now, create a very specific monthly budget and spending plan. Make sure your monthly budget is lower than it was previously.
  4. If lowering your budget and cutting back on your spending habits isn’t enough to reach your monthly goal, consider taking it a step farther. Consider picking up extra work, a second job, or selling extra assets. Although this step might not be ideal, it will get you out of debt faster.
  5. Create long-term saving goals. Learning how to manage your finances is an invaluable life skill that will help you save money, even after you’ve paid off your current debt. Visit our “How to Save” section for tons of ways to save!

 

Although you won’t notice as much initial progress, the first two steps are crucial to getting on the road to debt freedom. As you progress through these steps, you will start to see your progress. Think about it like a diet: if you don’t persevere, you won’t reach your goal. So, stay strong and persevere. Before you know it, you’ll be debt free!

 

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Good Tip: Saving money is important – especially if you have a lot of expenses like bills to pay, loans to pay off, and all the other things that drain your bank account. Figuring out a way to save money can feel tedious to some, and like a punishment to others. U.S. News suggests that you try one of these money saving challenges. The “No Eating Out for a Month” Challenge This one is self-explanatory. The goal is to avoid eating out for an entire month. This might be super easy for people who enjoy making meals at home. People who really enjoy dining out, or ordering food to be sent to their home, may struggle with this one. It’s worth a try because spending money on take-out is more expensive than buying groceries. The Pantry Challenge This one is a variation of the “No Eating Out for a Month” challenge. The goal is to use up all of your groceries before you buy more. It forces you to try and remember why you bought a food or beverage that you don’t know what to do with, and gives you the opportunity to find a way to use it. The one exemption to this challenge is the foods that have expired. Don’t eat them! Throw them in the trash. The “No Spend” Challenge Make a goal to avoid spending money during an entire weekend. The only exemption in this challenge is that you are allowed to pay bills. This challenge is interesting because it requires creativity. You must be creative and find workarounds for problems that you would typically solve by spending money. You may have a different outlook on spending after finishing this challenge.