Wednesday, September 05, 2012

3 tips for getting out of debt

credit card debt

Any type of debt is not an enjoyable thing to deal with, but it does need to be dealt with. If you are really deep in debt, then the prospect of getting out of it may scare you. I understand that it isn’t easy, but it can be done.  My family did it many years ago when my boys were younger with over 20,000 in debt.   With that in mind, here are 3 tips to pay of your bills and get out of debt.

1. Develop a plan. It’s important to pay off your bills, but you will struggle if you try to do it haphazardly. Instead, write down all of your debts, and decide which one you are going to attack first.  I followed the Dave Ramsey plan which was paying off the smaller debt first.  You should pay as much extra as you can on this target debt and the minimum payment due on all of your other debts. Once the first debt is paid off, combine the amount you were paying on it and add it to the next target debt on your list.  Your debt repayment will snowball!   Put all extra money towards it like an extra job.  Doing this will get your debt paid off quickly, and you get a psychological boost every time a balance is fully paid.

If you have student loan debt, that should be paid after credit card and car loan debt.  

2. Contact the companies  you owe money to. Your creditors may seem evil, and there ethics may be questionable, but you will be amazed at how willing they are to work with you when you give them a call. They may be able to erase late fees, lower your interest rate, offer a settlement, or set up a plan for repayment that you can live with.   For our credit card debt, we played the balance transfer game.
If you have been experiencing financial hardship, be sure to explain it to them. Some creditors offer hardship programs, and these often have the best terms, allowing you to get your debt under control.
3. Ease the way for money coming in, but restrict it for all money going out. Your mindset about money needs to be positive. You should regularly picture money flowing into your life, and be ready to accept opportunities that will add more income. At the same time, you need to restrict the flow of any money being spent.  This is known as abudget!  Ask yourself if it really needs to be spent, if there is a cheaper option, or if it can wait. The less you spend and the longer you delay, the more money you can put towards your debt. Granted, this will take a fair amount of discipline, but it’s necessary if you really want to be debt free.  
The above tips for paying off your bills and getting out of debt are only as useful as you choose to make them. In other words, just reading about them won’t do you any good at all. You need to take action! The good news is that all of these tips are quite easy to do. Furthermore, they will give you the power to get out of debt and stay out of debt. If you need a bit of encouragement to take the first step, then consider it done! The sooner you act, the sooner you will see all of the benefits that go along with being debt free.

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