Things You'll Need:
- All of your monthly bills
- A computer spreadsheet or notebook
- A mirror
-
Step 1
Determine how much money you owe - Gather all of your monthly bills in one place. Make a list of each one, noting such information as the amount outstanding, the due date, the interest rate you are paying (if it is a credit card), and the minimum amount due. You will find that most people underestimate the amount of debt that they have. Putting it on paper makes it real. Understanding your situation is the first step that you need to do to reduce debt faster.
-
Step 2
Determine your money inflows - Figure out how much money you actually make. Do not forget to include any extra money that you make from eBay, Craigslist, Blogging, etc. Do you have a part-time job? Include this income as well. You are no longer free to spend this money as you please.
-
Step 3
Compare the money you have coming in versus the money you have going out - Depressing, isn't it? This step is critical. Are you making more than you are spending? If not, things need to change. If you spend more than you make you cannot afford the things you are buying. Determine where you can cut back. Are you buying a newspaper every day? Yahoo! provides the same information for free (assuming you have access to the internet each day). Do you buy a cup of coffee for your daily commute? Buy a cheap coffee maker and brew your own at home. There are some really inexpensive and fairly price machines out there. Do your research!
-
Step 4
Develop a plan - In order to get out of debt, you must develop a game plan. I am here to tell you that making a budget works! Spend all of your money on paper before you spend it in real life. Tell your money where to go, instead of wondering where it went. Spend every penny on paper first! This tends to reduce impulse buying since you have already assigned each dollar a job to do.
-
Step 5
Review your progress frequently - When you are starting out, reviewing your progress, or lack of progress, every day is a good idea. Once you become more disciplined, you can review your progress weekly. Never go more than 7 days without reviewing your status. Money has a tendency to slip away if you do not retain strict control over it.
-
Step 6
Be flexible - You did not get into debt overnight and you will not get out of debt overnight. Have patience and give yourself a little credit. You can reduce debt faster than you ever thought was possible by following these simple steps.
