7 Simple steps to getting out of Debt

1. Don’t Panic

If you find yourself in debt, don’t let it dominate your life and thoughts. The best way to deal with debt, is to make a plan of action to resolve the situation. It is only when you know the full extent of your problem that you can work out what you need to do. It will not help to ignore the problem because you will always have a feeling of anxiety at the back of your mind. If you feel out of your depth, take the advice of professionals.

2. Change your priorities - Pay off debt first

Decide how much you should try and pay each month and then make this a priority for your spending. Make this debt reduction, the first payment out of your paycheck. Then use the rest to pay for other things; if you do it the other way around, you may find you spend too much and don’t have enough to make more than the minimum payment.

3. Pay off highest interest debt first.

The real difficulty in dealing with debt occurs when we have large interest payments. This means we can be paying significant amounts just to service the debt, without reducing the actual debt. Therefore, try to reduce the highest interest paying debt. This may be credit cards at 18% interest.

4. Cut off inessential spending.

Take time to go through all your monthly expenditure and for each item see whether it is essential or can be reduced. For example, do you need both a landline and mobile? Do you need 300 cable TV channels? For each bill look at whether it is worth switching to another company. More ideas on reducing overspending

5. Cash Only.

If you have a tendency to overspending, try carrying only cash around. When you have to withdraw cash and part with it, it becomes more difficult to spend. When we can buy things on plastic we tend to be much more willing to spend money.

6. Extra income

Nobody likes to take a second job. But, if you did overtime for just a couple of months you could put all the earnings into paying off your debt. This creates the snowball effect of reducing debt and debt interest payments. Therefore, after a couple of months you can go back to a single job, but, you will be in a better position to pay back the debt.

7. Debt Settlement

This is an last ditch resort, but, for some people it is probably better than declaring bankruptcy. It involves a debt settlement company, on your behalf, negotiating a reduction in your debt. It leaves you with a single monthly repayment and a lower total amount of debt. This option has to be taken with due care and consideration. In particular, it is important to not see it as the solution, but part of the solution. If you make a debt settlement,but, don’t address the underlying causes of debt it will merely delay the problems.

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