Being in debt can be an extremely large source of stress for anyone. It can also keep you from reaching the many goals you have set forth for yourself, such as buying your first home, taking a long vacation or saving for retirement. There are many people who have been trying to get out of debt for awhile but don’t know where to start or what to do. Following the seven steps listed below is a good start to paying your debt off for good and living the life you want.
#1 Think About How Your Debt Began
Thinking about how and why you got into debt in the first place is where you want to start. You want to identify the habits or circumstances that got you into debt in the beginning so that you can change them later on. Start by writing down at least three issues that caused the debt to build up. Maybe you were overspending because you had a good job, but now your hours are cut and you can’t afford the payments you are responsible for. Knowing why you are in debt is the beginning step to getting yourself out of it.
#2 Reconsider Your Spending
Your spending habits may easily contribute to your debt without you even realizing it. It’s easy to spend a little bit here and there on your credit card, but those little bits can add up fast! The first step is to create a personalized budget for yourself and stick to it. You may wish to start writing down everything you are spending your money on, from clothes to food to a cup of daily coffee, to pinpoint where the cash goes. From there you can create a budget that cuts out the frivolous spending you are doing and leaves money for necessities and savings.
#3 Consider Your Debt
You may have turned a blind eye to how much debt you really have up until this point. But it is now time to face your reality if you want to get out from under it. First, make a comprehensive list of every debt you have. Write down how much you owe, the minimum payment, and any interest rates you are paying on. You may want to look at your credit report to make sure you are aware of everything that you owe.
#4 Start Paying it Down
You may be paying the minimum amount on your credit card bills and other debts because you think it is enough. But by paying the minimum, you are almost guaranteeing that your debt will be over your head for years to come. Find ways in your budget that will allow you to pay even more per month on your bills. This will help you pay off the interest rates and get the debt down to a reasonable amount. Soon, you’ll see the light at the end of the tunnel and will be able to get rid of each debt once and for all.
#5 Plan Your Debt Payments
You will want to begin your debt payments by prioritizing the debt that should be paid off first. If you have two credit card bills, one with a very low interest rate and one with a high one, choosing to pay more to the latter is the best idea. Or, you may want to totally pay off a smaller bill first to get it out of the way so you can focus your energy and money on the really big debt. Find a solution that works for you and stick with it.
#6 Pay Off your Debt
You’ve made the lists and mapped out a plan. Now it is time to stick with it! Make sure that you are sending your payments in every month, without fail. While this may take a few years before you see a major difference, keep your end game in mind.
#7 Don’t Create More Debt
Don’t use your credit cards or open up new ones while you are paying off your debt. You’ll only create another bill that will keep you from reaching your goal. Pay for what you need with cash as much as possible. This will help you pay off your debt and meet your goals in the long run.
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