How to Get Out of Debt
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How to Get Out of Debt
Dealing with debt is a burden faced by many American families. For many, debt is just a part of life and month to month they are forced to factor into their budgets the money they’ve borrowed that they now must pay back.
Though it might seem as if having debt is the norm and the cost of surviving in today’s modern world, it is possible to live without debt. It takes a bit of effort and short-term sacrifice, but over the course of a lifetime, most people are thrilled they made an effort to get out of debt.
What do you need to do if you want to get out of debt?
Your first step to getting out of debt is being honest with yourself and admitting you have an issue with debt and many others do to. Maybe things aren’t that bad and you simply want to deal with what you have. On the other hand, maybe your debt is a major burden and you’re walking a thin line between managing it and dealing with a crisis.
Whatever the case might be, it’s time to take an honest look at debt.
Gather all of your bills and assess the overall situation. Calculate how much you owe in total and how much you are paying each month. It can also be informative to add up what you’re paying in overdraft, over limit, and late fees each month, if that’s the case. It’s also a good idea to determine how much of your payments are going toward interest versus what’s paid toward principal.
Many people are shocked to learn how much their debt is costing them.
Create a Plan
Now that you know where you stand and what you’re willing to do to reach your goals, you can create a plan. Every good debt pay off plan begins with a budget. Calculate your monthly living expenses and subtract those from your monthly income.
Next, set aside the amount of money you want to save. Aggressive debt pay off plans don’t put much focus on savings, but there is risk in this approach. If you don’t yet have three months of expenses saved, try to do that before you put your primary focus on debt. If you already have a comfortable chunk saved for an emergency, you can take a more focused approach to repaying debt.
Commit to the Plan
Even the best laid plans fail if you aren’t truly committed to them. Once your plan is complete, take a long hard look at your willingness to stick to the plan. And if you share finances with someone else, discuss the dedication both of you have to the plan.
The key to success is sticking to your plan long term.
Far too many people approach paying off their debt with the best intentions, only to get a month or two into the plan and return to their old spending habits. In order to be debt free once and for all, you need to figure out how long it will take to reach your goal and commit to whatever you need to do during that time.
Keep in mind, for some people it might be easier to stick to a more aggressive debt pay off plan for a shorter period of time. Some people are just better at short-term extreme sacrifice. Others do better when they aren’t as aggressive and commit to a longer period of time. You know yourself and your family best. Neither approach is better nor worse – choose what’s best for you.
Learn from Your Mistakes
Finally, once you’re on the road to getting out of debt or you’ve achieved your goals, you need to be careful not to return to your old ways. Nothing would be worse after you’ve worked hard to get out of debt than to run up credit card bills again.
Your debt payoff plan taught you to live below your means, and now that you’ve had experience doing so, it should be easy to live within your means. Use credit cards wisely and make sure you continue to save aggressively.
Should you extend yourself a little too much one month, cut back the next month until things are back to balanced. The time and effort you put into getting out of debt was too valuable and too educational to return to the way you once were. The best thing you can do is to learn from your mistakes and know how to manage your money in the future.
Not everyone’s debt problems are dire, but there are plenty of people who aren’t sure where to turn. Debt is the primary thing in their life causing them stress and they feel desperate.
If you’re struggling financially and you’re looking for a way to get out of debt, we can help. We understand what a burden debt can be for an individual or family, and we know what out-of-control debt can cost you. There is no reason why you can’t get out of debt, no matter how bad your situation might be at the moment.
Many people are simply past the point of no return and should consider Chapter 7 Bankruptcy or other options. Perhaps you are being sued for debt or you already have judgments. At this stage you should really consider hiring a debt relief attorney to assist in dealing with creditors.
For more information or to discuss your options for dealing with debt, contact 1.800.220.4318.