How To Get Out Of Debt Faster

I like Erin’s basic tips. They are a good start on how to stop going more into debt. There is a whole lot more on how to get out of debt, but this definitely the place to start. For those of you living hand to mouth, wondering how to get to the next pay day, this is where you start.

1. Stop Using Your Credit Cards

2. Ask For a Lower Rate

3. Consider a Balance Transfer

4. Make Payments Automatically

5. Spend Smarter

Once you have got this under control, now you need to look at Dave Ramsay’s Seven Steps for getting out of debt which is a lot more comprehensive. Dave’s steps are about getting on top of the debt, reigning in spending, having a safety buffer, then setting yourself up for financial independence and philanthropy.

This is all hard, difficult work. I wish you all the best in your quest to stop debt controlling your life.

  1. Set up an Emergency Fund
  2. Tackle your debt with the Debt Snowball
  3. Save 3-6 months expenses
  4. Invest 15 percent
  5. College Fund
  6. Pay off home loan
  7. Build wealth and give

Paying Off Debt

Pay Your DebtI tend to spend money, where she would rather do without to save money. Have you ever bought something, thrown a party, or taken a vacation with a justification of we deserve it? There is nothing wrong with rewarding yourself or loved ones by splurging on material items or going on a nice vacation, but it should not take precedence over being fiscally responsible.

It is acceptable to reward ourselves once we reach certain financial goals set from a previous year or once we meet an investment goal.

Paying Down Debt – I had always made paying my debt my first priority. If I had any money left over I would “invest” what little money we had in the stock market until we needed the money to pay down our debt again.

The problem with keeping your debt paid down without changing your spending habits is that it creates a vicious cycle of reckless spending.If you are like me, you will find very little if any additional money to invest.

While reading Robert Kiyosaki’s book Rich Dad Poor Dad, he discusses paying yourself first. It took me a while before I realized how to pay myself first. Paying off debt remains a very high priority, but I do not pull money from my investments to pay my bad debt. Just as a reminder, bad debt is debt that we pay ourselves and good debt is debt that someone else pays, simply the debt of an asset.

Stop adding to your debt- It sounds simple but most people overlook this critical step to paying off debt. Accumulating more debt while trying to get out of it defeats the whole purpose, always spend wisely. Make a list of all your bills and create a daily budget so that you know how much to spend.

Identify High-Cost Debt

Yes, some debts are more expensive than others. Unless you’re getting payday loans (which you shouldn’t be), the worst offenders are probably your credit cards. Here’s how to deal with them.

  • Don’t use them. Don’t cut them up, but put them in a drawer and only access them in an emergency.
  • Identify the card with the highest interest and pay off as much as you can every month. Pay minimums on the others. When that one’s paid off, work on the card with the next highest rate.
  • Don’t close existing cards or open any new ones. It won’t help your credit rating.
  • Pay on time, absolutely every time. One late payment these days can lower your FICO score.
  • Go over your credit-card statements with a fine-tooth comb. Are you still being charged for that travel club you’ve never used? Look for line items you don’t need.
  • Call your credit card companies and ask them nicely if they would lower your interest rates. It does work sometimes!

Ways to pay off debt

 

Lower interest rate on credit cards – Call up all your credit card companies and politely ask the representative if he or she can lower your interest rate. More than half of the time this works according to a study. Do not close credit cards after you have paid them off because this will lower your credit score.

Shop Wisely, and Use the Savings to Pay down Your DebtIf your family is large enough to warrant it, invest $30 or $40 and join a store like Sam’s or Costco. And use it. Shop there first, then at the grocery store. Change brands if you have to and swallow your pride. Use coupons religiously. Calculate the money you’re saving and slap it on your debt.

Each of these steps, taken alone, probably doesn’t seem like much. But if you adopt as many as you can, you’ll watch your debt decrease every month.

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