Debt Reduction Tips On How To Get Out Of Debt
Getting out of debt often seems like an uphill battle, and not matter the debt size, it can be difficult to see the light at the end of the tunnel. However, it is possible to get out of debt, and fast!
Debt reduction involves three key steps:
- Stop acquiring new debt.
- Create an emergency fund.
- Pay off debts.
The first step to debt reduction is to stop adding to it. Plain and simple, stop using your credit cards, and refrain from opening any new credit cards no matter what kind of rewards, miles, or any other incentives credit card companies will lure you in with. Turn off any automatic debits from your credit cards, cut up existing credit cards, delete your saved accounts on online shopping sites that might have your credit card information saved. Once you stop accumulating more debt, you are on your way to debt reduction!
Next, start saving! Have a portion of you paycheck automatically transferred to a savings account. You won’t be tempted to spend it if its not there. If you don’t have direct deposit at work, set it up with your bank to automatically transfer a set dollar amount to a savings account every month. Once you establish a solid savings, this will be your emergency fund…not your credit card.
Finally, start paying off those debts! You can do this two ways: One, you can start by putting the most money toward the cards with the highest interest rates, thus eliminating the higher interest rates first. Or, you can arrange your debts in order from lowest to highest, and start by putting the most money toward the cards with the lowest balance. Once that card is paid off, apply the money you were putting on that card to the next lowest balance. This is a great approach to debt reduction, and often referred to as a snowball effect. As the smaller debts get paid off, more money is applied to the larger balances, and credit cards are being paid off one after another. A key factor to this approach is to never alter the amount of money you pay towards your debt each month, and you will be well on your way in the debt reduction process!
In addition to these steps, there are several daily tips that can play an essential role in debt reduction. Cut your expenses. Using coupons, waiting for sales, eliminating any non essentials from your shopping list, and cutting out luxuries can all be great ways to save money. On top of cutting your expenses, add to your wealth! Have garage sales, sell stuff online, get a second job. This will all be extra money you can use towards debt reduction.
Quit postponing, and making excuses. Start today, and that light at the end of the tunnel will get brighter and brighter!