How To get Out Of Debt

Do you need debt help? Are you having trouble paying your bills? Before you look into a debt consolidation company, or even declaring bankruptcy, there are steps you can take yourself. Debt consolidation companies do not always fulfill their promises and you may even end up owing more than when you started. So try these steps first. If you are determined and diligent, you can get out of debt, but it won’t happen overnight. You didn’t get into your current situation overnight; it’ll take a while to get out of it. Be patient.

Make a Budget

List all your income for the month. Then list all your expenses. If an expense does come on a regular basis every month, then divide it by the how often it comes. For example, if a bill comes every other month, divide it by two. If it comes once a year, divide it by twelve.

Paying Off Your Debts

Doing this will show you where your money goes. After you’ve made this budget, stick to it! It it’s not in the budget, don’t buy it. If there are any expenses you see which can be eliminated, then do it. Use that money or any other income you generate (a raise, a second job, etc,) to pay off what you owe. Don’t be tempted to spend it.
One Strategy – Pay off the Debt with the Highest Interest First

List all your debts along with the percent interest on them. Sort them by the interest rate. The highest ones will probably be your credit card debt. Then concentrate on paying off the one with the highest interest rate. Use any extra cash you can come up with. This method will save you the most money in the long run. Be sure to pay at least the minimum on the rest of your bills to avoid late fees and a reduction in your credit score. After you’ve wiped out the debt with the highest interest rate, tackle the debt with the next highest rate and so on.

Another Strategy – Pay off the Debt Which Has the Smallest Balance

The advantage to this strategy is psychological. Fairly quickly, you’ll see one debt completely wiped out. That will make you feel like you’ve accomplished something and give you encouragement to continue.
The only exception you may want to make is if you owe a small amount on a credit card you have which has a low introductory interest rate. Save that one until later when the rate goes up.

When One Debt is Paid Off

After you’ve paid off one debt, add that money to what you are paying on the next debt on your list. Then, after the second one is paid off, use the money from both of them to work on the third one. Do you see how this will get easier as you go along? You’ll have more and more money to pay on each debt as it is tackled and it will be paid off faster.

Contact Your Creditors

If you fall behind on a payment, do not ignore the problem. That solves nothing. It is much better to contact the lender and explain your situation to them before they take the step of calling a collection agency. They will see that you are taking responsibility for your obligations and may work with you on a revised payment plan, something you can afford.