The reason most of us wind up in debt is because we lack the self control and the basic money management skills necessary for keeping ourselves out of debt. We generally have a lack of understanding into the value of money and live with the expectation that we will always have to carry debt. We are a society of people who want instant gratification, and have little or no self control on spending and we frequently purchase on impulse. We have difficulty distinguishing between wants and needs and we always seem to find a way to justify a want into a need. Furthermore, we are not taught proper money management skills as part of any educational curriculum, and yet this is probably the most valuable of skills we should be passing onto our children.
In order to get out of debt, you need to come to the realization that you are not destined for a life full of debt. You have to make a decision that you will not go any further into debt and your sole focus is getting out of the debt you created.
So now that you’ve made the decision to eliminate debt the first step you should take is to figure out where your money is being spent on a monthly basis. Challenge yourself to find at least $200.00 within your current budget that could be redirected towards the elimination of debt. For example, do you currently have all the fancy extra on your home phone service? Why not cut back to the basic service to save a few dollars a month? When you find areas of your budget that you can trim back look at the monthly savings and also the amount saved annually. The saving seem much more significant that when you look at it annually. The most creative thing I came up with when I found and extra $1100/m within my own budget was to car pool with my spouse 2 days a week. That alone saves us $120/m not to mention we get to spend extra time together, it’s better for the environment and it less wear and tear on the cars. It does require sacrifices, for example I get to work an hour earlier 2 days a week and my spouse has to busy himself for 2 hours one night a week. But we both agree the sacrifice is worth the extra $120/m to put towards paying off debts.
Next, use a budget! A budget doesn’t have to be a nasty word. A budget is the only way to effectively manage your money. If you have no plan for your money it will surely just slip through your fingers. Make sure you budget for things even if they are not a current expense. For example, if you budget $50.00 for car maintenance and repairs but don’t use it for that month, set it aside regardless so it you will have enough to cover the expense when it does arise. Also, be sure to include in your budget a portion of your income towards savings. Even if it is only 1-2% it is at least something. When you are comfortable living within your means you can aim to save more.
Finally, create a plan based on the amount you have committed towards debt reduction. Pay off balances smallest to largest and once a debt is paid off add the monthly payment to the next debt to be paid. By concentrating on one debt at a time the task will not seem so monumental. If you want your debt to really go away fast, consider taking a part time job or doing something that will create a supplemental source of income. Make sure you commit to every penny earned from a supplementary source be used to go straight towards paying off debts and not to enhance your budget or improve your standard of living.
With a little patience, sacrifice and determination you can kick debt to the curb! So go out there and do it!