How to Get Out of a Financial Rut

You know you're in a financial rut when you're spending money faster than you can earn it. Whether it's because you don't have a budget, simply can't stick to one or are truly living beyond your means, the only way to break out of the rut is to make a few real and lasting changes.

Instructions

1. Stop the denial. Many people get in a financial rut in the first place because they refuse to live within their means. If you are using credit cards for all your "extra" purchases each month, then you must first recognize that you have a problem.

2. Establish a financial goal. Instead of working towards being debt free entirely, focus on paying off one bill at a time, preferably the debt with the highest interest rate. After you create a monthly budget and allot money for those must-pay bills, such as shelter and clothing, designate extra funds for the debt that you would like to pay off. Set a period of time for which you would like to pay the debt in full, and establish the minimum dollar amount you will need to pay each month.

3. Make a few trade-offs. Those morning trips to the coffee shop or afternoon breaks at the vending machine can add up quickly. Make a list of all your unnecessary purchases, such as video rentals, fast food and designer shoes. Make the commitment to reduce your spending, or do without.

4. Consolidate your debt. Determine how much money you will need to pay off your debt, with the exception of your mortgage, as well as the total monthly payment. Consider consolidating your debt into one, easy payment.

Tips & Warnings

• When consolidating debt, make sure that your monthly payment does not exceed what you were paying on each individual bill. You also will need to factor in any fees associated with taking out a loan.