8 Ways Out of Debt

I am asked on a regular basis how I would go about getting out debt and so I thought I would outline 8 easy things you can do to help.

Begin tracking your expenditures immediately. Most people have no idea where their money goes and by keeping a close eye on your purchases, you can determine which are needs versus which are wants.

Once you know where your money goes, formulate an action plan to reduce unnecessary expenditures and free up money to pay down debt.

Prioritize your expenditures. Make sure you only spend money on things that align with your life goals instead of just paying off expenses as they occur. Set aside money first for debt repayment and then budget for things such as saving for college or retirement.

Try leaving your credit card at home. Studies on spending patterns indicate consumers are likely to spend more using a credit card than when paying in cash. If this is too challenging, I suggest just closing your credit card accounts as this can help you resist the desire to overspend by restricting your credit limit.

Consider a debt consolidation loan so .you can benefit from lower interest payments. If you transfer the balances from high-interest credit cards to a lower-interest loan you may save a substantial amount each month.

Always pay more than the minimum payment on loans where the interest is compound and not simple. An example of a simple loan is a car loan where the interest has already been factored into the purchase so paying the loan off early has no benefit.

Use money sitting in low interest savings account to pay off high interest credit cards. If you are making 2% and paying 18% that just isn’t good business sense.

Try negotiating a better deal with your lenders, it never hurts to ask. If you’re feeling overwhelmed, don’t be afraid to ask your lenders if they are willing to lower their interest charges or reduce your required monthly payments to help you get back on track. Lenders would much rather work with you and get paid than have you declare bankruptcy and they get nothing.