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Step 1
Find out where your money goes. Write down all incoming such as paychecks or sales and all outgoing such mortgage, rent, car payments, utilities, groceries, eating out, clothing, loans, credit card payments and entertainment. Just find out where your money is going in detail from the big payments to daily lunches at work.
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Step 2
Cut back on unnecessary payments. Magazine, book, music, gaming and movie subscriptions may not seem like much individually, but when you add them together the monthly bill might surprise you. Your local library has many of these items available for you to use for free. Board games and movies from the library make for an entertaining evening without costing you money.
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Step 3
Stop using credit. Most of us have some form of debt in credit cards or house and car loans. Mortgage is an investment, so this is not the type of debt I'm talking about. To pay off debt you need to condition yourself to stop using credit cards. Credit cards are great for emergencies, but if there is no need, don't use credit.
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Step 4
Cook at home more. Most people would be surprised just how much of their monthly budget goes towards eating out or buying ready made convenience meals. Cooking more homemade meals from basic ingredients is extremely cost effective and healthier for your family. Bringing lunches to work is another way to cut meal costs.
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Step 5
After cutting down on unnecessary items and spending, rewrite your budget. You might be surprised how much money you have freed up in your budget. This excess money will be your first step towards paying off your debt quickly.
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Step 6
Use the extra money left from the budget to start paying extra on loans or credit cards with the highest interest rate. If you have multiple loans, make the minimum payment on all of the others but the one with the highest rate. Commit to this plan for getting out of debt quickly.
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Step 7
After a credit card or loan is paid off, we have a bad habit of thinking the money we no longer have to pay on that bill is free or extra money. Thinking that way is what put us in debt in the first place. Take the money from the payment you no longer have and immediately apply it to the next loan or card with the highest interest rate. Keep using this method for all loans and the payments will compound, which means debt will go down even faster.
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Step 8
Save up for want you want. If there is an item you really want or feel you must have, put away a little each week or month to buy it with cash. If you really want the item, it can be done. But, often we find that the desire for unnecessary items fade over time.
Comments
respectfully said
on 9/10/2009 This is a great article. paying off debt. 5* recmnd
godfather25 said
on 7/19/2009 Paying off debt sounds like a great plan. Very good article. 5*