5 Steps You Need to Take to Get Out of Debt
Let’s face it, being in debt is horrible, especially where there is not a plan to get out of debt and doing so seems completely impossible.
Most Americans are able to meet the necessary payments with little additional expense, making it very difficult to save money or get out of debt.
However, there is a way to get out of debt even on a limited monthly income. While it may mean temporarily sacrificing certain expenses and giving up some free time to generate additional revenue, there is a light at the end of the tunnel for those who are in debt.
By following this five-step process, you can get out of debt and live a life full of financial freedom.’
1. Stop Taking on More Debt
First and foremost, it is important to stop the debt in its tracks by not taking on any more debt from anyone, including credit cards, loan services, and even friends and family members.
By taking a stance and deciding to not accept any more loans from anyone, you are able to take self-accountability and put your financial future into your own hands. Trust me, you are far more capable of becoming financially independent than you may believe.
One of the biggest problems individuals who fall into debt have is that it becomes a constant pattern of taking on more and more depth, digging their financial hole deeper everytime they use their credit card or take out another loan.
While resisting the urge to take on more debt may seem difficult, or even impossible, it is possible to do by cutting expenses and attempting to add an additional income(see below).
While it may make living more challenging in the short term, ending the cycle of adding debt anytime there is a financial need is a necessary step towards financial freedom.
2. List All Debt Information
After deciding to stop the debt where you are at, it is time to come to terms as to exactly how much debt you owe, and who all you owe a debt to. The first step in the process is to create a list of all the creditors and lenders you owe, which may include credit cards, student loans, car payments, etc.
After making a list of all the people and places you owe money to, it is time to find out exactly how much you owe each creditor. Finding out how much you owe each creditor may require contacting them and receiving a quote from them.
In doing so, you may be able to negotiate the rates down as much as possible, or even settle the debt outright at a much lower rate.
Be sure to check the contracts for each place and person you owe money and ensure their estimation as to how much is owed is accurate according to the information agreed upon in the contract.
3. Eliminate Unnecessary Costs
Another necessary component to getting out of debt in the quickest manner possible is to eliminate unnecessary costs that you may be currently paying. A few ways to do so may include the following:
- Reduce your car payment
- Be more energy efficient
- Plan your snacks and meals
- Shop more efficiently
Of course, each person has a different set of expenses, and lowering the cost of living by cutting out unnecessary costs is different for each individual. However, there is always a way to lower how much your expenses are by being creative and seeking cheaper alternatives to certain lifestyle choices.
Additionally, you may be able to actually lower your debt payments as well through negotiating lower payments on certain debts or even settling your debt outright at a much lower rate with creditors.
Most assume creditors have all the power when it comes to debt collection, but the one who owes the debt actually has some leverage in the situation as well, which can be used to their advantage and unnecessary debt payments can often be lowered.
4. Create a Realistic Plan
After eliminating as many unnecessary costs as possible and organizing all information pertaining to how much you owe each creditor, then you should be well equipped and able to create a realistic plan to get out of debt.
If you have a limited monthly income, you have probably seen a lot of advice on how to get out of debt that seems as if it does not apply to you, such as “save up thousands of dollars for emergencies.” Of course, doing so may be nice, but it is simply not realistic.
However, where there is a will there’s a way. After calculating all expenses, cutting out all unnecessary expenses and determining how much you bring in each month, you should be able to create a surplus each month, which can go towards paying off debt.
In the event you are only breaking even, leaving little money to pay off debt, consider searching for additional income opportunities, such as part-time jobs and selling unused items that may be sitting around your home.
There is always a way to earn more money doing what you love, whether it is refereeing sports games at night or consulting in an industry or field which you have knowledge of, there is something for everyone.
5. Stay Disciplined and Get Out of Debt
Many who create a plan to get out of debt are able to follow it for a few months, but then eventually fall back into the same routine of frivolous spending, especially if they have a lot of debt.
However, it is important to remain disciplined and stay on track. Be sure to always remember that there is a light at the end of the tunnel, and the reward of financial freedom is worth the struggle to pay off debt.
It may be helpful to have a friend, family member or spouse to hold you accountable, urging you to stay disciplined when you start to go outside of the budget and purchase items that you can live without.
Category: Debt
