Getting out of debt can be hard. And it’s not a process that is done overnight. A great deal of forethought and discipline are required to make yourself debt-free. But if you’re willing to get this monkey off your back, then here are the steps you need to take:
First, you’ll need to face your debt. In order to get rid of your debt, you have to come to terms with how much you owe, to whom you owe the money, and how you even got there in the first place. Managing your debt means finding out what caused you to get into debt in the first place and making sure that you don’t find yourself falling into the same trap.
The next step you should take is to change your spending habits, particularly the bad ones. Find out how much money you earn and how much money you tend to spend each month. After which, you’ll need to start a budget and you’ll need to stick to it. Stop overspending and get control over your money. By learning where all your money goes, you’ll be able to differentiate needs versus wants. Also by keeping track of your money, you’ll be able to change how much you spend on each expense. If you find yourself spending too much on entertainment, then maybe you can cut back on going to the movies every week to once a month instead.
The third step will be calculating how much you owe and how much you can afford to pay each month. It’s always best to pay more than just the minimum due in order to get faster results. With this knowledge, you are able to put together a plan on how you will pay off each debt. Also, it will enable you to see if you need to augment your income in order to get more debts paid off.
Once you know how much you make, how much you need to spend on daily living, and how much you owe, you should move on to the next step: creating a debt plan. Now, your debt plan doesn’t need to be complex, full of calculations. You just need to prioritize your debt, choose which debt would be paid off first. You can choose to pay the debt with the highest interest rate first or pay the smallest debt first to get it off your list. After prioritizing, you should then decide how much you will be paying every month to each debt. The best way to deal with this is to calculate the minimum due of all the debts and create a lump-sum payment that would go to the debt on the top of your list. This way, you ensure that you will not incur any raise in your interest rates while still making definite progress on one debt.
The last and most important step to becoming debt-free is to follow through. Don’t let all the hard work and planning go to waste. Pay off your debt.