No one loves being in debt – or even likes it. It is very stressful and can be overwhelming very quickly. Relationships can be ruined by debt and an inability to get the situation under control. Getting out of debt takes determination, a plan, patience and persistence.
- List debts by interest rate
It is easy to ignore what is going on but far better to face it head on. I keep a list of all recurring debts and by interest rate. There are too schools of thought – when you list your debt, list it smallest to largest and pay off the smallest first, then roll that payment into the next smallest. It snowballs very quickly with clear results. The other method is to list them from smallest to largest interest rates and hit the highest interest rates first since they are costing you the most. Either method works very well – choose one and make it part of your plan.
- Have an emergency savings fund
Expect the unexpected work to have some sort of emergency fund. This can be a separate bank account or even cash envelopes in your dresser drawer. When I first started this I had an envelope in my dresser drawer – then once it got a bit larger than I thought it ever would be, I was afraid my husband would think I was stashing money to leave him. I decided it was time to put it in a separate bank account.
How do you save when you think you have no money? For me it started with purposely buying things with cash (instead of check or debit) and I would always purchase with whole bills – never trying to pay with coins. At the end of every day I would put all the coins into a jar. Then it got to the point where I would only keep $5, $10 or $20 bills in my purse – all $1 bills and all change went into the jar at night. Believe me it adds up quickly! On an added note – I found that the more I paid with cash – the less I bought. It is much easier to part with debit $$$ than for actual dollar bills.
- Always make minimum monthly payments
Never forget to make those important minimum payments on each of the debts you have, this will keep you from making any higher payments in the future. Failure to make at least the minimum payment will just result in actually throwing money away when you have to pay the late fees etc… I pay all my bills online. If you do the same thing it is important to pay attention to which payments settle in 2 days versus those that take 5-7 days. Not paying attention to this can result in late payments.
- Create a budget and remove any extraneous items
Creating some sort of a budget is very important. Don’t be so stingy with the budget that it is unrealistic and not livable. You want to get a handle on what you truly spend and cut what you can. For example – we just cut cable. There are so many options nowadays to allow you to cut the cord so to speak – why pay that extra $100 per month. But if I had to have no TV in order to cut cable – that would not be realistic. I just had to have a more economical solution. Constantly keep your mind open to debt reductions.
In our house, because we tend to do a lot with cash, the envelope method is another way of applying a physical budgeting system to our plans. This system is how we save for trips, something special that we want and to put some money aside for those unexpected home costs such as needing a new refrigerator when you least expect it.
Nationwide Debt Reduction Services can help. You don’t need to take on the world alone.