Easiest Way to Get Out of Debt

The average American adult has about five thousand dollars of debt. This means the typical married couple has about ten thousand dollars of debt. This figure does not include mortgage balances, which average about seventy thousand dollars. It also doesn’t include student loans. The standard student loan balance owed is about fifteen thousand dollars. All of this adds up to a significant amount of debt, and a lot of pressure for a large percentage of the population. These steps will show you the easiest way to get out of debt and gain the peace of mind that comes along with being debt-free.

Difficulty:

Moderate

Instructions

1. Track all of your spending for a month. Write down every single penny you spend for a whole month. Also, figure the amount you spend annually on items such as car maintenance and gift-giving. Divide this number by twelve, and add the amount to your monthly spending.

2. Create excess cash. Once you know how much you are spending each month, you can easily compare the number to how much money you are bringing home. If you have a surplus, then this will be the excess you use to get out of debt. If you do not have a surplus, then you absolutely have to eliminate any unnecessary expenses, such as cell phones and cable television, as well as expensive meals out and designer clothing. You decide what you are going to get rid of based on your priorities, but you need to create as much extra cash each month as you possibly can. If you are unwilling to make any cutbacks, then you are going to have to bring in more income, possibly with a second job or a significant raise in salary.

3. Make a list of your debts. You need to list your debts in order from smallest to greatest in terms of the amount you still owe on the debt.

4. Apply the excess you created to your smallest debt. Continue to make the minimum payments on the remainder of your bills.

5. Redistribute the excess as you pay off debts by adding the amount of the payment you were paying on the retired debt to the next lowest bill you still owe. Continue to do this until all of your bills are paid off.

6. Transfer high-interest balances to zero-interest accounts when possible. If you can transfer your balances to get a lower interest rate without incurring the costs of hidden fees, then you should consider doing so. Interest rates are where credit card companies make all of their money. A lower interest rate could save you hundreds or even thousands of dollars, depending on the size of your debt.