How to Get Out of Debt in Six Easy Steps
Getting out of debt is hard enough. Regardless of how you dug your way into the black hole, there are a lot of ways to get yourself out of it, if you are game to try. Here’s what you do:
- Set yourself a budget. For real, this time! Get out the pencil and paper and write down everything you spend money on over the course of a month. Break it down to a week by week basis if you have to. This isn’t just some guesstimate about how much you think you spend. And this also shouldn’t be a number that just sounds good. Go through all of your bills and write them down. Then, add up all your little things that aren’t normal bills. For this, we mean your morning coffee, dinners with friends, or purchases that you like to make. These little things all add up. Don’t forget about them, or else you’ll get to the end of the month and realize you spent all your money on the little things and didn’t have any money left for bills.
- Stick to your budget! The most important part of paying down debt is trying not to increase what debt you already have. So, stop spending on anything frivolous.
Here are some tips:
- You might not need those $4 coffees or dinners out with friends. If you do go, order a water instead of an expensive drink.
- Reduce monthly bills that can be reduced. Chances are, your rent won’t change. But maybe you can get a cheaper internet or cable package? Do you really need all those bells and whistles or can you get by on something much less expensive?
- Take the amount of money you put aside for your fun stuff – going to movies, downloading games and other activities and cut it. The best option is to stop all of those expenses. However, a significant cut of 50 percent or more would be a step in the right direction.
- Prioritize your debts. A general rule of thumb: Take care of your loved ones first, your creditors second. As long as everyone has food and shelter, you can start looking at your bills. Find out which are the most important to you and pay them off first.
- Negotiate with your creditors. Give them a call and explain your situation. When you owe money to a big corporation, the person you call on the helpline doesn’t really care if the corporation gets all of your money or not. Just explain what’s going on, politely. Chances are, the person in the call center has a go-to answer for those who are looking for a little help. They might offer you a deferment, or they might cancel some late fees. It never hurts to ask.
- If you have a federally backed student loan, there are programs offered by the government to ease the burden of recent students.
- If your burden comes from your mortgage, make a mortgage modification request. This would reduce your monthly fees. Mortgage companies are under pressure to be open to these kinds of requests.
All of the above ways to reduce debt are techniques you can do on your own. If they don’t work, then it might be time to put your situation into someone else’s hands. One option is to use a debt consolidation company. Their job is to take all of your debts and put them aside. They will deal with all of your creditors. You would continue to look for work, and they would handle the bills. The only thing is that they would require you to pay a minimum deposit every month. They would disperse that money wherever it is needed the most. Beware of scams, though. Any deal that seems too good to be true probably is.
Bankruptcy would be the last option, only if it the worst case scenario. If you declare bankruptcy, it gives you a reprieve from bills, but hurts your credit for years to come. It is better to give these six steps a try, first, and see if they can help you get well on your way to repairing your credit, putting more money back for rainy days, and allowing you a feeling of security for your future.