How to Get Out Of Debt
Building debt seems to be one of the easiest things you can do. Getting out of debt however, is one of the hardest things to do. It is not impossible, but you will need to curb some spending habits and learn some better habits that will help you pay off your outstanding debt. You need to learn how to stop gaining debt so you can change your life for the better.
You can begin by not increasing your debt any further. Credit cards that have been used until you have reached your credit limit need to be cut up. Cards from department stores and gas stations should be cut up, as well. The percentage rates on those cards are normally higher and you really should avoid using them at all cost. You can survive with only one credit card that is kept for emergencies only. This will help you get your spending under control and keep you from increasing your credit card debt.
To get your spending under control, you need to realize how much you are spending during any given day. The best way to do this is by writing down every bit of money you spend per day. This may seem like it is unnecessary. Essentially it is crucial to help you see where you are spending your money and why.
Chances are you are in debt because you keep spending money that you do not possess. Debt accumulates over time. So a lot of small purchases add up faster than one large purchase. In order to keep track of your spending and learn how to control it, you need to write down every amount you spend, clear down to the last penny.
Impulse spending is usually done before you brain has been given the chance to think about what you are doing. It’s time to slow down and consider items you are about to purchase and put them in categories of ‘Must Have’, ‘Should Have’ and ‘Like to Have’. An item you ‘Must Have’ is considered to be food, clothes, gas and purchases that are needed to keep you from becoming sick or inhibit your daily living conditions.
‘Should have’ types of items are things you may need but you can do without them for a short time. These items include new clothes for purposes that are not necessarily warranted, or memberships to organizations such as gyms or clubs. An item that is a ‘Like to Have’ item is something you do not need in order to survive; they simply enhance your life.
When you commit to making purchases with this categorizing system in place, you will have a better time making important choices and be able to control your spending better. This will also show you what you can live without and what you cannot live without. It does not mean you do not treat yourself to a few ‘Like to Have’ items on occasion. What it will do is help you decide what you can cut back so you can curb your spending habits.
This will help you save money in the long run. The extra money you save can be put toward paying off your debt. When you begin to save more money, you can put the extra amount toward your minimum balance due on credit card payments. If you continue to make minimum payments, your debt will increase due to high interest rates and you will pay more money than you spent and it will take you a very long time to pay off the credit card debt. When you pay just the minimum payment and nothing more for the entire time you are in debt for a certain credit card, you will end up paying them fifty five percent more than you were credited.
In order to find freedom from debt, you need to know what you spend every month and create a budget. Write down how much you spend on household bills, food, gas, clothes, insurance and any other necessities. No matter what the amount may be, write it down. This will be your new budget based on the amount of money you typically spend in a month.
Now you will look at your new budget and see where you may be able to cut back on expenses. You may also see areas that need to be increased, as well. Just keep in mind to be reasonable with the amounts so that you can survive comfortably.
No matter how you look at it, there are always going to be ways you can trim your budget. Whether you begin to control your smoking habit and stop buying cigarettes or you decide that you can forgo the stop at the coffee shop every morning that typically costs you ten bucks.
Once you have figured out what you can trim from your new budget, you will be able to figure out where the extra money can be spent to help pay down your debt. Keep this figure in your mind and consider what you spend every month. Some months it may not be possible to use this extra money due to unexpected expenses, or it may keep you from making an impulse purchase.
Next you will want to figure out who you owe money to and their terms. Being in debt is an overwhelming feeling simply because you have no idea how much debt you really carry. Take a look at all of your bills and make a list of them. You will need to include all of the facts such as the name of your creditor, your minimum payments per month, the total balance and interest rates per bill. When all of this information has been collected, you are ready to begin paying off your creditors.
Use the figure you created that can be trimmed from your new budget and apply it to debt payments. It is highly suggested that you start by paying down the highest amount of debt you have listed. You should prioritize the list so that you pay the biggest debt of first and then commit to paying the next biggest debt off until you have worked through your entire list. If you have any debt that is past due, then you should work on paying it first. The idea is to pay down your debt total with the excess trimmed from your budget. It is about making small sacrifices so you can get yourself out of debt.
The key is to apply the excess money from your budget and being applying it to the credit cards that have the highest interest rates first. Once you have that paid off you can begin applying the extra money toward the next credit card listed that has the highest rate. It will become easier the longer you do it. You will find yourself out of debt as each payment becomes easier to make. You will also want to refine your budget over time. This may help you find more money to apply to your debt and decrease the amount of time you are in debt.
When you have paid off a credit card that was acquired for convenience purposes and have high interest rates cancel the accounts by calling the credit card company. This will keep you from being tempted to use them again in the future. Whatever you do, do not give up. Your debt did not collect in a single day. You will not find yourself crawling from beneath your debt in a single day either. It is good to learn how to manage your money and it will create lasting habits that will keep you out of debt in the future.