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Practical Tips for Getting Out of Debt

Creating your own get-out-of-debt plan truly is possible. With some fundamental changes to your lifestyle, you can get out of debt fast even with a low income.

However, turning around your financial situation doesn’t happen without some work. It requires commitment, planning, and strong self-discipline. But luckily, it gets easier over time as you build better spending habits.

Don’t wait to take back control of your life. There are many ways to get out of debt fast.
1. Stop Borrowing Money
The first and most important step in getting out of debt is to stop borrowing money. No more swiping credit cards, no more loans, no more new debt.

Reshaping your attitude toward money and debt is the most fundamental change that has to happen. In order to avoid digging yourself into a bigger hole of debt, you have to understand the true cost of swiping a credit card and taking out new loans.

Resolve to live on a cash basis while you make your changes. Don’t worry about debt consolidation or balance transfers at this point – you’re still in the early stages. You don’t want to trade one kind of debt for another until you understand your situation and have a plan.

When we counsel people entering a debt management plan, they take their credit cards and cut them up. Resolve to live on a cash basis; it’s crucial to start a new phase of life without taking on new debt.
2. Track Your Spending
The next step in getting rid of debt quickly is to figure out where your money is going. It can be difficult to decide where to make budget cuts without having a full picture of what you pay for and how you spend.

It’s best to track all of your monthly bills for at least a month as well as daily spending. Don’t forget to include your debt payment obligations while tracking.

There are a number of ways to track your money. Some of the most common ways include:

Use a budget worksheet
Keep notes in a notebook
Use a free money management app
Use banking app trackers
Keep receipts
Whatever method you choose, make sure it is one you will remember to use every day and will help you get a full picture of just how much money you spend.
3. Set up a Budget
Once you’ve tracked your spending, it’s time to create a budget. By using your regular spending as a guide, this budget should account for all of your needs.

The tracking will also show you places to cut spending. You’ll be able to see where you’re spending too much and where you can easily make cuts without deeply affecting your life. Of course, you may also find places that need changes that you may not want to make. It’s important to find a balance between livability and a strict budget to get out of debt.

A vital part of the budgeting process is to put it in writing. It’s not enough to mentally plan how much you’re going to spend – it has to be recorded in concrete form.

It’s also important to include financial goals in your budget. Writing your goals down makes you 42% more likely to achieve them. For you, the goal to get out of debt fast is probably your #1 priority, but don’t forget to build an emergency savings fund as well.

After your debts are paid off, you can come up with more goals to save. Just remember to add them to your budget in writing to hold yourself accountable.
4. Create a Plan to Pay Off Debt: Try a Debt Snowball Method
Now that your spending has been tracked and your budget created, it’s time to implement a payoff strategy. If you need to clear debt fast, you’ll need to know exactly how to pay off debt with a plan that maximizes your payoff schedule.

One of the quickest ways to get rid of debt fast is by using the “debt snowball” approach. Debt Repayment – Doing the Math | Credit.org. This strategy calls for you to make minimum payments from your monthly debt payment fund to all but one of your debts. This specific debt will get more than the monthly required amount and will be paid off quicker as a result.

When that debt is paid off, you choose another debt and reallocate all of the extra funds toward it. Keep repeating this process until all debts are repaid in full. Over time, the extra funds snowball, while the amount of money you dedicate to debt repayment stays the same.

For example, imagine that you are dedicating 20% of your monthly income to your debts, which comes out to approximately $300. If you have 3 debts, you would pay $50 to one, $50 to another, and $200 to the 3rd. Once the third is paid off, you’ll pay $50 to one and $250 to the other.

Remember to keep the total amount you put toward debts consistent. If you are putting $300 toward debts each month, and you pay off one of the debts, you’ll still be paying the full $300 toward debt the next month.

This method accelerates your repayment faster as debts get paid off. When trying to decide which debts to pay off first, you can sometimes focus on paying the debt with the highest interest rate first. However, which debt you choose to focus on might depend on your situation.
5. Pay More Than the Minimum Payment
If you’re trying to figure out how to get out of debt fast, you should try to put as much as you can toward debts every month. Remember the debt snowball method – every chance you have to make higher payments will bring you closer to being debt-free.

When you create your initial budget, set a minimum amount that you are putting toward debts each month. This should be around 20% of your total income. Of course, any opportunity to add more will help get you to your goals faster.

No matter what your situation, it’s important to pay more than the minimum required. Make this an ironclad habit. Even if you have a terrible month with unexpected emergency expenses, pay more than the minimum payment, if possible.

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