There are lots of options out there for those of us who are too far in debt. There is credit counseling and debt consolidation. There are lawyers offering to have your debt reduced for a fee, and in extreme cases, there is bankruptcy. With these choices, you might imagine that it’s impossible for you to get out of debt on your own.
The truth is that it is quite possible to get out of debt with no outside help. Even those who don’t think there is room in their budget to pay down their debts are often surprised. It takes willpower and determination, but you can usually get out of debt on your own.
6 Steps to Get Out of Debt on Your Own
Are you too far in debt? If so, to get rid of your debt you will need to develop a plan and stick to it. Here is a good plan to follow:
1. Stop accruing new debt. Put the credit cards away, and refrain from taking out new loans or refinancing old ones to borrow more money.
2. Create a budget. You need to know where your money is going each month, and in which areas you can cut back to free up more money to pay off your debts. If you’re not sure where your money is going, write down all of your expenses for a month and then make your budget.
3. Cut the unnecessary items out of your budget, and cut back anywhere else you can. Set this money aside to pay off debts.
4. Determine which debt you need to pay off first. If you have secured debts other than a long-term mortgage, you may want to pay them off first. Debts with high interest should also take priority, unless you have lower interest credit cards that charge exorbitant annual or monthly fees.
5. Make the minimum payment each month on all of your debts except the one that you have given the top priority. Put all of your extra funds toward that debt, and continue to do so until you pay it off. If you get a bonus at work or unexpected money from some other source, consider putting it toward your debt as well.
6. When you get one debt paid off, start putting your extra money toward the next one. Repeat until you pay off all debts in full.
Really want to get out of debt? Getting rid of debt on your own is often easier than you think. By taking a realistic look at our finances, we can often find ways to come up with the money to pay debts off without the help of anyone else. Doing so helps us keep up good credit, or rebuild our credit if it is imperfect.