debt-reductionOver the years, I have met many people that have had financial struggles and have gotten themselves caught up in extensive debt. Once this occurs it can be a real process to resolve the issue as the average person does not usually earn enough to get themselves out of debt easily. Listed below are 10 tips to help you get out of debt and stay out of debt.

  1. Stop Adding More Debt: It’s a no brainer! Well, if it’s so simple why aren’t you doing it? The more debt you create the harder it will be to reduce it or eliminate it. If you are constantly spending more then you make, you need to stop it. Start using cash. If you don’t have any cash, you cannot afford it.
  2. Get Rid of Your Credit Cards: One of the biggest downfalls that most of us have is the reliance on credit cards. Unlike spending real cash, when you charge it to a card you don’t feel the burn. So if you cannot control how much you spend on your card, then cut up your cards, leave them locked up at home, freeze them or bury them until you are out of debt.   
  3. Change Your Spending Habits: Do you always plan before you buy something or do you just pick things up? Do you ask yourself if you really “need” it, or justify your “wants” and keep indulging yourself?  Do you spend an excessive amount of money on showing off to your friends? Take a long hard look at your spending habits and fix any shortcomings that you see.
  4. Build an Emergency Fund: As you attack your debt, remember to put away a small amount for the rainy day. If something unexpected comes along or if you are forced to borrow money again, you will have a rough time getting out of debt. So stash away small amounts of money in an emergency fund, and make sure you use it, only for emergencies!
  5. Always Pay More than the Minimum Payment Toward Your Debt: If you only pay minimum payments, you will be old and gray before you pay off a the debt.  For example, if you only pay the minimum payment on a credit card loan of just $1000, at an APR of 18%, then it will take you around 13 years to pay off that debt. In that time you would have paid $1,115.41 in interest. That is more than the principal borrowed! Imagine how much worse it is with larger loans. So always try to make more than the minimum payments if you are serious about getting rid of debt.
  6. Change Your Housing Situation: Drastic times require drastic measures! If you are really deep into debt you might want to consider more drastic steps like moving to a city with lower cost of living, lower real-estate taxes, to a smaller house, to an apartment with lower rent etc.
  7. Constantly Look to Improve Your Current Income: The more the money you make, the more you will have left over to throw at your debt. So always look for opportunities for picking up tasks with higher commission, or overtime pay or something that will result in a bonus.
  8. Cut Your Spending: You still save some money after all of your bills are paid. When you look at your groceries, can you replace some brands with generics so you can save some cash? Can you stock up during sales to save some money? How about making sure you use your utilities wisely to save on the water, electricity and gas bill? Look at all aspects of your spending to pinch some more money out that you can throw at debt.
  9. Make a Budget: A budget is not really that difficult to make or follow. You don’t need fancy software or tools, just a simple notebook and pen, or a trusted spreadsheet program. List all your recurring bills like rent/mortgage, groceries, utilities, bills and put a limit on it. Then create a category for miscellaneous expenses to cover what you cannot plan for and an indulgence category. If you don’t have enough for paying towards debt, tweak and tune these categories, until you find enough.household-budget
  10. Create Additional Sources of Income: Sometimes it is not easy to simply increase your current income at your day job. If that’s the case, look at means to create additional sources of income. Do you have a hobby that you can monetize? Do you have skills (musician, carpenter, writer, etc.) that you can use to get some part time gigs? Do you have computer knowledge that you can use online? Creating additional sources of income not only helps you get out of debt but provides you with better cushion to survive through primary job loss. An online business can be a great source of additional income.

Security begins with getting debt under control, and that begins with getting a clear, honest picture of how your expenses stack up against your income. Until the numbers appear on paper, we often don’t realize what our spending really looks like. You’ll be amazed to see how a few minor changes can really add up. Above you will see many other ways you can modify your spending habits to decrease your expenses. Keep cutting expenses and use the money you save to eliminate credit card debit and other debts, build an emergency fund, and save for long-term goals.


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