Debt is a problem many people face at some time or another. However, once you’re in debt, it seems to grow bigger. It’s a vicious cycle. And if you are looking for a way out of debt fast, there are steps you can take. But first you need to take action on these steps:
Get Out of Debt Fast The first and perhaps the easiest step to get out of debt fast is to simply stop borrowing money. No more credit cards, extra loans, no new debt. Reshaping your attitude towards debt and money is the first step.
Start by creating a budget – a written plan of how much money you have coming in and where it’s going. For most people this is easier said than done. You probably have the thought that if you have a budget you must be disciplined. The reality is that you don’t have to be strict with your budget. Creating a budget is just the first step towards getting out of debt fast.
Create a spending plan Get rid of those credit card bills and list out every penny you spend. Make a list of your top three expenses: rent/mortgage, groceries and gasoline. Now, eliminate anything that’s on your regular shopping list but is not necessary. Perhaps cut back on the coffee shop trips and other impulse buying. Stick to the bare-bones lifestyle. This may mean cutting back on the entertainment budget or evening out altogether, but the point is to create a spending plan.
Start to pay off your debts As you’re sticking to your bare-bones budget, take advantage of any ‘how’s’ or ‘crisps’ in your debt. If you can take one thing off your list that is essential, do so. You will have to set aside time to focus solely on these debts. By eliminating such necessities as cable television, high interest loans and auto payments you can create space for more important purchases.
Decrease your monthly payments As you’re slowly working your way out of debt, you need to take advantage of every monthly payment you make under your debt balance. Many people believe that they can only decrease their debt by 50% each month by paying off their balance over a number of years. Keep in mind, however, that you want to work your way out of debt by paying as much as possible each month. If you get to the point where you owe far more than you earn each month, then credit card debt will be unmanageable and will not bring down your debt balance as quickly.
Work on a debt consolidation plan Once you’ve worked to decrease your balance and have a strategy for decreasing your overall debt balances, it is time to move onto the debt consolidation plan. When you consolidate, you combine your current high interest loans (credit cards and mortgage) into one loan with a lower interest rate. In many ways, this makes the credit cards’ payments obsolete. However, keep in mind that debt consolidation programs generally come with a high cost. In most cases, debt consolidation companies require that you first turn a profit, pass an exam, and possibly maintain a certain level of liquid capital. Once you have done these things, you can obtain your new debt consolidation loan at a better interest rate than your other credit cards.
Work to eliminate all unnecessary spending If you want to get out of debt fast, the first thing you need to do is get rid of any unnecessary spending. Examine your current monthly bills and determine if there is any unnecessary spending that could be eliminated. Some examples of unnecessary spending include eating out at restaurants, buying clothes that you don’t actually need, and buying things on credit. Once you have eliminated all unnecessary expenses, you can begin to reduce your debt by cutting back on monthly bills. If possible, you should also work towards eliminating any credit card debt you might have. You can do this by establishing a budget that will show you how much money you will be spending each month and work towards reducing that amount.