Getting out of debt, besides being its own reward, offers several benefits: your money now belongs entirely to you, and you are not being charged interest rates. If an emergency occurs, and you suddenly have less income for some reason, being debt-free allows you more options and more breathing space.
It’s important to remember that getting out of debt takes time. A gradual and reasonable approach to getting out of debt will give a higher chance of success. A lot of people become panicked when they realize they are in debt, causing them to either make poor choices or become incredibly stringent with their money. But if you cut out every pleasure in your life, it will be easy to ‘fall off the wagon’ and think that you’re never going to get out of debt, thus giving up.
To get out of debt, you first need to take stock of how much debt you have. Once you know how much debt you have, how much money you make, and how much your other expenses are, you can make a plan. A good way to figure all of this out is to track your spending for a month, so you can see where your money is going.
Once you’ve done this, you can see how much you can pay each month on your debt. If you look at credit card calculators, you can calculate how long it will take you to pay off your debt based on what you can pay monthly. Paying only the minimum will cause you to be paying for a lot longer and to be paying a lot more in interest charges. Even if you can only pay the minimum, try paying that minimum a few days early. Interest is often calculated on a daily basis – paying early will save you a tiny bit. The tiny bits add up.
Next you can look at where you can save some money to add to those debt repayments. Maybe you can cut back on your phone bill, clip coupons to save on groceries, or drive less. If your car lease is coming up soon, look at getting a cheaper car.
If you have high interest rates, and you’ve been paying your bills on time, you may be able to save on interest by calling your credit card company and asking them for a lower rate. Or you may be able to get another card with a lower rate and do a balance transfer. Be careful when doing this, as the lower rate on the new card might be for a limited time, and if you still have a balance when the time is up, they might charge you the higher rate on the entire time.
You could also try making more money. Sell things around the house on websites like ebay or craigslist, have a garage sale, or take all your books to a used bookstore. You can also try getting a part-time or on-line job.
Everyone’s path to being debt-free is different. Form your own plan and do what works for you.