There are many reasons why people get into debt and only just a few solid ways to get out. The most important step in getting out of debt is acknowledging your situation and analyzing your finances to find out if you really have a problem and if so, how big is it.
The first step is to make a budget. In one column write down all the money you earn in one month and in another column, write down everything you spend including your Starbucks habit and any other seemingly small incidentals that can really add up.
Total the two columns and that’s your first snap-shot into your finances. Then start to work on the difference. If you are spending way more than you are earning, you are headed for serious trouble. How big of trouble depends entirely on the difference between the two numbers. If it’s less than 10% difference, you can probably cut back and make it work by cutting back on some of your expenses like going out to dinner, shopping, and other extras. If the difference is between 10-20% you may need to sell something like a car or cancel your cable service to really balance your budget. Anything from 20-50% may require a restructuring of debt. Anything higher than 50% may mean a possible bankruptcy.
To get yourself out of debt follow these simple tips:
1. Write down every single thing that you spend money on for a month...everything!
2. At the end of the month, cross off all the things that you know you can do without and stick to it.
3. Don’t buy anything that you don’t absolutely need and look for the best deal on what you do need. Use coupons at the grocery store and only buy the meats cuts and produce that are on sale that week.
4. Evaluate all of your utility expenses. Cut back on water, electricity, gas use and cancel your cable or reduce the package to save money every month.
5. Don’t drive anywhere that you don’t need to go and combine all of your errands into one trip or even at one store to save on gas. Carpool for school and work if possible.
6. Try to negotiate with any of your credit cards that you are carrying a balance on to lower the monthly interest rate.
7. Save aggressively to start paying down any debt you may have accumulated and leave your credit cards at home so that you won’t spend anything more.
8. Prepare for the once a year expenses like auto insurance and property tax. If you have a little money left over at the end of the month, save it for those expenses or any type of emergency.
If you follow these tips and stay focused on your goal, you can start to work your way out of debt. However, if your debt is so high that even serious cost-cutting measures don’t help, you may be a candidate for debt settlement. Debt settlement can significantly reduce the amount of unsecured debt that you owe and help you get out of debt in less than three years. Speak to one of the certified debt consultants at First Rate Debt Solutions to learn more.
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