How to Get Out of Debt Faster

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By Will Atkinson
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Get Out of Debt Faster

The silver lining in the current global recession is that more people are beginning to pay closer attention to their personal finances. If you would like to get out of debt fast, consider using some of the techniques in this article.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

Self-discipline

Step 1

First you must make a list of all your monthly expenditures. List everything you can think of, down to the penny. You will be surprised at the amount of unnecessary spending. If you aren't surprised, chances are you are in pretty good shape and don't need to know how to get out of debt faster.
Step 2

Conserve. It seems like every financial analyst in the United States has picked on our Starbucks consumption at one time or another, but I'll wager that there are many other areas in your life where you can afford to cut back. Consider downgrading to basic cable. Bring a lunch to work instead of eating out. Do your own ironing instead of using the dry cleaner. The list you made in step one will give you a multitude of ideas.
Step 3

Pay yourself first. This is the hardest step for the vast majority of Americans. "How can I put money in savings when I have all of this debt?" The nature of life is such that we all have financial emergencies from time to time. You must pay yourself first in order to build your emergency fund. Your ultimate goal should be to have a minimum of three months living expenses in your emergency fund, separate from other savings accounts such as retirement, college, or vacation funds. If you need a little push to get you going, consider this: people with emergency funds tend to stay out of debt.
Step 4

Target the debt. You've made your list, you've started to conserve, and you are using some of the extra money to pay yourself first. Now you must target the debt so that you can pay it down faster. The easiest method is to start with the bill that has the smallest monthly payment. For this exercise, let's suppose that you have three credit cards with monthly minimum payments of $30, $75, and $100, respectively. Through cutting back and self-discipline, you now have an extra $50 per month to apply towards your debt. On the $30 per month card, you will pay $80 a month until it is paid off, paying minimums on the $75 and $100 a month credit cards. Once the $30 card is paid off, put it away. Now you have an extra $80 per month to apply towards the credit card with a $75 minimum. While continuing to pay the minimum on the $100 per month credit card, apply the $155 total to the $75 per month card every month until it is paid off. Put it away. Now you have $255 per month to pay down your last credit card. This method will help you to get out of debt faster. Good luck!