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Getting Out Of Debt Tips

Getting Out Of Debt Tips

Readily available credit and excessive consumerism has made it relatively easy to incur significant levels of debt. A constant barrage of advertising means most consumers have been brainwashed to have the latest and greatest gadget regardless of the financial consequences. Unfortunately, large amounts of debt can create severe negative repercussions for individuals and families leading to high levels of stress, marital difficulties and job loss. Debt isn't just a bill that comes once a month that you regret having to pay. It is something that weighs heavily on a person's shoulders affecting all aspects of their life. The best thing someone can do is to get out of debt as soon as possible and below are some tips to help you do just that.

Tip #1 - Know Your Debts

There is a saying that you can't fix it if you don't know it's broke. In order to get out of debt you must first understand everything about your debt. Who do you owe? What do you have to pay? Where is my money going? Outline all of your financial obligations and then break them out based on priorities from most important to least important. By doing this you will be able to determine what you have to pay and what you can eliminate.

Tip #2 - Create A Budget

After you have prioritized your debts you will be able to create a budget. A budget will focus on those areas which will have the greatest net affect in reducing debt the quickest while maintaining current financial obligations. Budgets are only successful when individuals stick to them even when times get difficult. Focus on your end goal and believe that adhering to your budget will result in getting out of debt.

Tip #3 - Trim Spending

You may find that both prioritizing debts and creating a budget results in scaling back certain purchases or activities. It is common practice for most individuals to live paycheck to paycheck and spend everything they make. One of the key tenets to getting out of debt is to spend less than you make. Basically, trimming spending will be a requirement to successfully getting out of debt which means sacrificing lattes every morning and eating out five times a week.

Tip #4 - Target High Interest

Once miscellaneous expenditures have been cut from overall spending the next step is to target high-interest debt to maximize limited financial resources. Consolidate high interest rate credit card debt into a low interest tax-deductible home equity line of credit. If that is not possible, try consolidating to a single credit card using a balance transfer check or transferring the balances directly. High-interest rate debt eats away at monthly payments so by consolidating to a low interest alternative the majority of your payment will be applied to principal. This in turn leads to more debt getting paid off quicker.

Tip #5 - Live Debt Free

Getting out of debt is very similar to being on a diet to lose weight. Many individuals who diet only have short-term goals and then once that goal is accomplished revert back to unhealthy behaviors. It takes a lot of time and effort to get out of debt so the last thing any reasonable person should want is to fall right back into where they started. Lifestyle and behavioral changes will be required if you plan to stay out of debt over the long term.