Steps to Get Out of Debt

Money/Finances - Debt/Debt Relief

By: JenniferAWalker     02-Nov-2010

Introduction:

Many Americans are struggling under a heavy load of debt, especially credit card debt. When you're knee-deep in debt, finding your way out can be difficult. It takes dedication, sacrifice, and perseverance, but you can pay off your debts and earn a new appreciation for money management in the process.

Stop Using Your Credit Cards

This is often easier said than done, but you will never get out of debt if you keep adding to it. Cut up your cards; keep one for emergencies if you must, but keep it somewhere safe from impulse buying.

Establish an Emergency Fund

The lack of an emergency fund is probably partly responsible for your current debt. Build up an emergency fund of at least $1,000 as quickly as you can.

Fund Your 401(K)

This won't help you with your debts, but it's important that you don't overlook your future or you'll be in the same debt situation when you retire. Contribute at least the amount that your company matches.

Face Your Debts Head on

This is often the hardest step. Gather all of your credit card bills together, and make a list of the total balance, interest rate, and minimum payment. Sort the list by interest rate, highest to lowest.

Snowball Your Debt Payments

Start paying something extra every month on your highest interest rate credit card. It may be as low as $10 to start. When you've paid off that card, take the entire minimum payment plus the extra and add that to the minimum payment of your next highest interest rate card, and so on. As you pay off each card, the remaining cards will be paid off faster.




Final Thoughts

When you start really trying to pay off debt, even finding $10 a month can be tough. Get creative - sell things on e-Bay or craigslist, take a second job one night a week, or find a legitimate work-from-home job that you can do in your spare time. You may be stressed and short on time for a while, but the relief of paying off your debts will more than make up for it in the long run.


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