Whether it is due to poor spending habits or through no fault of their own, many Americans owe large amounts of debt to several creditors. People tired of seeing their high balances each month should follow the following steps to get out of debt quickly.
1. Create a Budget
The first step to getting out of debt is for people to stop putting themselves farther in debt. Creating a budget allows people to see exactly how much money they are bringing in, where the money is going and what they can afford to spend on various items. If people spend no more than they can afford, their debt will stop increasing.
2. Cut Any Extra Spending
Spending less requires people to evaluate which items are truly needed and which items can be done without. This does not mean people are forced to go without everything, however. There are plenty of ways to get things for less. People can clip coupons for their groceries. They can also buy clothes on clearance racks and at second hand stores.
3. Reduce Bill Amounts
Once most of the extra spending is cut from people’s budgets, they are ready to move on to lowering their bills. People can call and get payment plan options for utility and electric bills. They can cut out expensive phone options or cancel their Internet for a time. They can cancel any gym and magazine subscriptions as well.
4. Lower Any Interest Rates
Higher interest rates mean more of a person’s payments go to paying interest than actually paying down the balance. What many people do not realize is that their interest rates are often negotiable. People can refinance their mortgages to lower their interest rates and payments. They can call and ask to have credit card interest rates lowered as well.
5. Develop a Plan
One common debt-repayment plan is known as the “snowball effect.” With the snowball effect, people pay the minimum on all of their debts except the smallest one, which they put all of their extra money towards. Once the smallest one is paid off, the money that was going towards that payment is added to the next smallest debt payment. As debts are paid off, the amount of money people have to put towards the next debt increases, or “snowballs,” until all debts are paid.
6. Earn More
Sometimes money-saving techniques are not enough to get people out of debt as quickly as they would like, and they need extra income to bring their balances down faster. There are several ways people can earn more money, including picking up extra shifts at work, getting a second job, or finding work babysitting, making crafts or writing articles online.
While getting out debt can be hard work, it is always worth it. If people commit to following the debt-reduction steps listed above, they can experience the peace of mind of a debt-free lifestyle before they know it.