Getting out of Debt – You Can Do It!
I am writing this post hoping that it will help even one
person get their finances in order and eliminate debt especially credit card
debt form their lives. Consumer debt has become a big issue in our society and
it is ruining many lives. But the is a solution, it’s not easy but you can get
out of debt and become debt free if you are willing to make some changes in
your spending habits.
Many families have a lot of debt. This nation is getting used to buying more stuff
spending more than they make and is caused by unconscious spending habits and
attitudes.
Most people know how to get out of debt and make good spending
decisions, but sticking to a tight budget to get out of debt is the hard part.
Getting out of debt and staying out of debt is a very hard thing to do and does
take some time, but in the end it will make life a much more enjoyable
experience.
The way to get out of debt is to live within your means. To do this a person
should make a monthly budget by adding up all income they make in a month.
Then, add up all monthly expenses they will incur that month. This includes: mortgage
(or rent), utilities, car payments, food, gas, monthly debt minimum payments,
insurance, and any other miscellaneous expenses. Now take the income minus the
expenses and this will show the amount that can be used to pay extra on minimum
payments. If the monthly expenses are more than the months’ income then there
will need to be cuts in the expenses or find ways to add to the income.
This is a zero based budget and all money should be
accounted for. After figuring out how much money is available, then add up
everything that is owed except the mortgage of the house that is the primary
residence. Add up all debts so that there is a total amount to give an amount
of how much to pay off. Then there are two ways to get the debts paid off the
fastest. One way is to list all debts from largest amounts to lowest amounts
and then start paying any extra amount of money towards the lowest amount owed.
Once that debt is paid off add that amount to the amount being paid and then
pay off the next lowest amount until all debts are paid.
The second way to do this is the same except to list the debts from highest interest rate to the lowest interest rate. The main thing is to just start paying debts off and to put as much money as possible towards once debt at a time, while paying the minimum payments of the other debts, until all debts are paid off. The most important part of a budget is to stick with this budget. There is only so much money that can be used in the month and when that money is used then there should be no more spending. So it is important to make sure essentials are paid for first before the money is spent on non-essentials.
Sticking to a budget can be very hard, especially if this is
a new idea.
There are a few tips that can be used to make getting out of debt
easier.
One useful tip is to decide to never owe for anything again. Anytime
there is a payment or something that would be nice to have, this needs to be in
the budget. If there is not enough money to pay for something right away then
either find a way to do without or save up to buy. Being in debt is a behaviour problem. No one will ever get out of debt if while debt is being paid off, new
debts are incurring. Another tip is to use cash to be for everyday expenses
like food, gas, and entertainment money. When using cash it is easier to see
how much money can be used for spending and that when the cash is gone then
there is no more spending in that category. Using cash is a great exercise and
will make each decision a more important decision. To make the money stretch
the most a person will learn to do without things that are not as important and
to make wiser decisions.
While getting out of debt cutting utilities is another
way to lower the expenses. Non-essential utilities can be cut like cable,
land-line phone, internet, lower packages on a cell phone, gym memberships,
magazine subscriptions, Netflix, and finding ways to lower electric bills.
These can be temporary but can make additional money that can be added to pay
more towards debts. Another tip is to find a part time job or sell stuff you no
longer need to add additional money to the income. Then use this additional
money to pay more towards the bottom debt on the list. The more money that is
put towards this debt the faster it will be paid off.
If trying to get out debt gets to be too overwhelming then another option is to contact a debt counselling service. They can give financial advice and help explain the financial situation and help give answers to get out of debt. Being free of debt is one of the best things a person can do to ensure a peaceful future. When a person has no debt they have less risks and are more free to use their money the way they would like. It will be hard work paying off debts, but it will help make everything in life mean more and will be worth it.
