“Never spend your money before you have it.”
President Thomas Jefferson
Being in debt is never easy, but using some simple to follow steps, you can get out of debt before you know it. Once you are out of debt the main goal is to stay out, rebuild your credit, and secure financial well being. Below are some smart ways to get out of debt.
Don’t Put It OffPaying off your debts should be the number one priority for your financial future.
Track SpendingKeep your receipts; check your bank and credit card statement to figure out you daily, weekly and monthly expenditures. Look for ways to cut back on your spending. Simple low cost items add up to a larger cost over time. A $4 dollar latte over the course of a week turns in to $20 per week, $80 per month. The $80 in lattes can be used for paying off debts every month, try making coffee at home as a substitute.
Set RulesDo you really need what you’re about to purchase? This is a question you need to ask yourself. Once you calculate your monthly budget is, it will make answering this question easier. All the “small” spending adds up to a large bill at the end of the month. Only purchasing necessary items and paying bills should be the main concern until you get out of debt.
Pay More than the Monthly MinimumPaying only the minimum payment of $36 on $1900 of credit card debt with 18% interest every month will take you 20 years and 1 month to pay off, while paying $3,914.83 in interest. If you pay $100 per month it will take you 1 year and 11 months with only $313.86 in interest. Pay as much as your budget allows to the credit card with the highest interest rate, and pay the minimum to your lower rate cards.
Use Cash over High Interest Rate Credit CardsWhen carrying cash you can only spend what you have. With your credit card in hand over spending is much easier to do and it happens more often than not. Give yourself a daily, weekly and monthly budget and stick to it. If you decided you can spend $20 per day and you spend $10 on coffee and a muffin for breakfast then you only have $10 for the rest of the day.
Obtain a Debt Consolidation LoanMost people do not think this as a money saving tip, yet if you have multiple high interest rate credit cards and you have gotten close to the limit on all of them, then a debt consolidation loan might work for you. These types of loans consolidate multiple debts into a single monthly payment instead of several payments at different times of the month. When you make your debt consolidation loan payments each and every month, on time and in full, this pattern of good payment will in effect help your credit score. We have more information on paying off debts with a loan for debt consolidation available for you.
Following these simple tips should help you get out of debt. Just remember when paying off debts, put your money where it counts, not purchasing what you don’t need and saving for your future.