Being in debt is a stressful experience. If you signed for a loan, you are obligated to pay it back even if you have a life altering experience like losing a job, getting into an accident, or even if you have increased expenses due to having a child. Debt doesn’t have to be forever though. Develop your financial game plan and start your journey toward being debt-free today.
1. Stop Borrowing Money.
If you want to get out of debt fast, you have to stop using debt to fund your lifestyle. This means no more financing furniture, no more signing up for credit cards, no more test driving brand new cars that you don’t have the cash to pay for.
2. Create A Realistic Budget And Stick To It.
Developing a budget that tracks your income and your expenses is crucial to getting out of debt in a short period of time. It will help you gauge where you are with your finances so that you can move forward toward your goal. It will expose whether you have money left over, which is called a surplus, or if you are in the negative, which is called a deficit.
3. Earn Some Extra Cash.
If you are in a commission-based job then this means that you need to make more sales, which will probably involve having to work more hours. If you are in a salary job and you are limited in the hours that you can work, then you might need to pick up a second job.
4. Trim Your Expenses.
Go over each line item on your budget and ask yourself, ‘how can I make this number smaller?’ It may involve cancelling services that you rarely use like a gym membership. It might even involve reducing the amount of times that you eat out at restaurants each month.
5. Organize Your Debt.
This is paramount to mapping out a plan to pay off your debt. There are two approaches that are worth considering. The first is where you list your debts smallest to largest regardless of the interest rate. The other method is called laddering. This is where you list your debts, starting with the highest interest rate card first and end with the debt with the lowest interest rate.
6. Throw Any Excess Cash At Your Debt.
If there are times where extra money fell in your lap that you had not factored into your debt elimination originally, take this cash and use it to tackle your debt. Some good examples would be a tax refund, selling a car, an inheritance, winning a bet, etc. The more cash you can put towards your debt, the faster it will disappear.
7. Establish A Starter Emergency Fund.
If you don’t have any money in the bank and an emergency does happen, how are you going to pay for it? For most people, credit cards become the funding source for those emergencies. If you are trying to get out of debt then you need to put a buffer between you and debt; that is exactly what an emergency fund does.
8. Stop Using Credit Cards.
To ensure that you get out of debt, you’ll need to stop increasing your debt. Switch from a credit card to a debit card so that the money you spend goes out of your account immediately.
9. Pay More Than The Minimum.
Credit card payments are structured to keep the cash flowing to the credit card companies for as long as possible. Avoid falling into a trap that hurts your financial position and helps your creditors by paying off more than the minimum payments whenever you can.
10. Talk To A Debt Counselor.
Your counselor will work with you to develop a plan to eliminate all of your debt and will contact your creditors to get the interest rate on your loans reduced.