To get out of debt may be a daunting task. Truth be told it is, just as
it probably took months or years of bad financial habits to get into
debt it will probably take the same amount of time to get out.
However, living a financially sound and debt free life is well worth
the effort. Adhere to the following steps if you want to reach this
Switch to cash only – It is simple math: if you spend more than you
take in then you accrue debt. By purchasing with cash only you limit
your spending and you will effectively stop adding to your debt. Put
your credit cards away in a safe place or, if they are too tempting,
cut them up.
Make a budget – Many consumers have no idea where their money is
going. So, for at least one month track your spending. You may start to
see that those small things like ATM fees and the daily coffee habit
start to add up.
Prioritize spending – There are essential expenses (housing, utilities
and food are three big ones) you can’t live without, but there are
also non-essential expenses (cable, multiple phone lines, new car)
that can be reduced or done away with. Separate what you need to pay
for from what you want to pay for. Also, list all your monthly debt
payments including who you pay, how much you owe, and at what interest
Increase cash flow – Simply put, make more or spend less. Look into a
second job or more hours at your first. Have a garage sale or return
purchases that you couldn’t afford. Look through your spending and
decide what you can get rid of or reduce. Switching to a cheaper used
car, dropping the land-line for your cell phone, and using coupons at
the grocery are some possibilities.
Make a new budget, pay off debt, repeat – Using your new income and
expenses, make a budget that leaves you with extra each month for debt
repayment. Pay off the debt with the highest interest rate first, as
that is the debt that costs you the most money. Once that debt is paid
off, make a new budget and payoff the debt with the next highest rate.
Continue until you until you are debt free.
This has been a guest post, written by Monique Rowe who often provides Guest Posts to Paying Paul. I really loved this article, and almost everything she says aligns perfectly with the general financial principles of this website.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.