How to get out of Debt

In today’s world of looming financial crisis, home mortgage foreclosure epidemics, and rising unemployment rates, all people are looking for ways to reduce their debt obligations, and fast. There are several ways to make a positive impact on your debt-to-income ratio, which will be discussed in this article.

* Stop Making New Debt

This is perhaps the most underrated rule in all debt relief programs. It will be physically and mathematically impossible to ever achieve the dream of being debt free if you continue to create debt. Stop the use of any and all credit cards and get used to the notion that you don’t need something if you can’t afford to pay cash for it. Make out a budget for your necessities and save every available extra penny to begin putting towards your mountain of debt to make it smaller.

*Begin Paying Off Old Debt

Once you have put a hiatus on all discretionary spending and debt creation, focus your efforts on paying down the debts that you have. You should rank your debts in order from smallest to largest and pay them off in that manner, which I will explain in just a moment. Also, you should probably rank your debt in order from worst to not as bad. For example, the worst debt is credit card debt, by far, and the most acceptable from of debt would be a home mortgage. A sample ranking from worst to not-so-bad would be credit cards, unsecured lines of credit, automobile loans, student loans, home mortgages.

Once you have this ranking, begin in the first category and put every extra penny towards paying off the smallest debt, while making minimum payments on all the others. Once the first balance is paid off, put all of the money you were putting on the first balance, along with anything extra, towards the second balance, on so on. When you finish all of the debts in on category, move on to the next using the same principles. This will start very slowly in the beginning, but will really begin to pick up steam after one or two balances have been paid off.

* Make More Money To Pay Off Debt Faster

This sounds like common sense but it really can be useful to help for instance. For example, if you are really strapped for cash while you are just making minimum payments, look for ways to increase your income. Maybe you could pick up a second job delivering pizzas, or writing articles for Helium, or doing anything that will bring in extra money, as long as it is legal of course. Money can also be found by cutting out some expenses that you think are necessary, which really aren’t. Some examples of things you could cut are cable television, on-line subscription accounts, and eating out, just to name a few. It won’t seem like much money at first, but it will really add up quickly once you begin paying off some of your smallest balances.

If you are serious about getting out of debt and are willing to make the needed sacrifices, you can use the age-old steps above to do just that. Trust me. I’ve been there. I’ve used these steps myself. They work.