The first step to getting out of debt is breaking it down into manageable portions and creating solutions a step at a time.
Allowing the problem to overwhelm you to the point of inaction assures that it will continue unabated.
ReadyForZero, a company that creates answers for people who are in debt, advises that a full understanding of your own finances is the key to getting a handle on debt. The company’s advice includes:
1. Know where your money goes.
Replace fear with facts. Be minutely aware of how much money comes into your household each month and where it goes.
If you make most of your purchases with a debit or credit card, log into your online account and do a detailed study of your purchase history. Divide it into categories such as Groceries, Entertainment, Rent, Utilities, Transportation, etc. If you use cash, track spending for a month to develop this data.
2. Don’t Spend Too Much
Are you spending too much? Debt is inevitable if your outgo exceeds your income. Resisting the ubiquitous advertising that surrounds us is a conscious choice that must be made. New electronic gadgets, clothing or cars seldom lead to real happiness if you can’t afford them and they shackle you with debt. Examine your spending behavior and start to change your mental processes. Remove the triggers that encourage you to overspend. Learn to distinguish between real needs and simple desires.
Get rid of your credit cards. Use only debit cards, cash or checks. These modes won’t allow you to overspend as credit cards do. If you are addicted to spending, find new way to gain pleasure and happiness. There are things you can do in almost any community that don’t cost money.
3. Focus On One Debt With The Highest Interest Rates
Pay off debts that carry the highest interest rates first. Add just a few dollars to each payment, more if possible. Some lenders will agree to a lower interest rate. If they will not, look for a transfer option that will give you a better rate. Consider a consolidation loan, but only if the interest savings are real. A small reduction in the interest rate can translate into a big savings.
4. Change Your Motivation
Your motivations have to change. And that isn’t easy. Find inspiration in your family, your life goals or meeting some kind of challenge. Make visible reminders, such a family photos and written ultimate objectives, that are constant reminders if the family is your focus. Write down goals, such as buying a house, retiring early or otherwise meeting life goals and put them where you see them daily. Set a specific date when you hope to be debt free and circle it on a calendar that you can’t ignore.
5. Increase Your Income
If low income is at the root of your indebtedness, try to resolve it. Look for a source of income outside your regular job. Sites such as Elance.com and oDesk.com offer short-term freelance jobs you can do at home. There are jobs in writing, designing, transcribing, organizing and other specialties that are listed online. If it is possible, try to increase your earnings at the job you have. If you can, upgrade your skills to make yourself more valuable to your employer. Research what other people in your job category make and, if necessary, try to match their earnings.
These steps will all make little inroads into your debt load. But none of them will make a difference if you don’t take that first step: the conviction that you can do it. Let fear and inertia drop to the side and begin.
