How to Get Out of Debt and Stay Out

Most American’s have some debt whether it’s school loans, a mortgage, credit cards, or a combination. Living under the burden of debt can not only be hard on your monthly finances it can play havoc on your relationships, cause unneeded stress, and depression. This is why getting out of debt and staying out of debt are important goals to have. This guide will help better prepare you for the process of getting out of debt and staying out.

Things You'll Need

• Current statements from your creditors
• Copies of your credit report from Equifax, Experian, and TransUnion
• Notebook for budgeting
• Scissors

Instructions

1. Before you can work toward paying off your debt you have to know how much debt you have. The first place to begin is by gathering all credit card, mortgage, car loan, college loan, and any collection notices you may have. Prioritize these by how much you owe with the least amounts being what you will pay off first.

2. Get copies of your credit report from all three credit reporting agencies. You are entitled by law to receive a free copy once each year from the credit agencies so take advantage of this. You can use your credit report to make sure that you have a complete listing of all your debt. Even if you only owe a few dollars you need to pay it off to truly become free of all debt.

3. Set a monthly budget and stick to it. Each month sit down with your spouse and work out a game plan on how much of your income needs to go toward the necessities. Be realistic with the budget. Include everything from clothes for the kids to the electric bill to food for the family. If it’s not on the budget then you don’t get to buy it. It might seem hard to stick to the budget at first but once you see the extra money being used to pay off your debt it will be worth the sacrifice.

4. Cut up your credit cards. Most people use their credit cards for daily expenses. If you want to live a debt free life cutting up your credit cards is a great place to start.

5. Save your money. Instead of rushing out to buy a new car when you get the one you have now paid off save your money and pay cash for it.

6. Pay off your smallest debts first. Start with the lowest amount on your list you compiled in steps 1 and 2 and pay them off first. This will help you gain momentum as you move toward higher balance debt.

7. Resist the urge to borrow money. It is possible to live without debt and once you see that it can be done the urge to go back in the hole is much easier to resist.

Tips & Warnings

• Getting into debt was easy but getting out will be hard. It takes a lot of work but the reward in the end makes it worth the time. If you feel you aren’t making enough money to pay off your debt in a timely fashion consider working a second job for a few months.

• Keep detailed records of all transactions. If a company comes back after several years claiming that you did not pay them you can pull out your records as proof of payment.

• Don't let a payment go out without making a record of it. You should keep copies of all payments made for future reference.