How to Get Out of Debt Free: A Step-by-Step Guide
While it’s not that surprising to those in debt, the remaining minority might be surprised to find out that 80% of Americans are in debt. While this might seem like a daunting figure, you’ll find that it’s possible to pay off debt and still live a happy life. Rather than paying a financial advisor, you can learn how to get out of debt free all on your own.
Getting out of debt will take patience and a fair amount of struggle. When you’re looking debt in the face, you’ll find that it can be hard to imagine being out of it. If you stay focused on your goals and imagine life beyond debt, you’ll find yourself motivated to get out.
If you’re interested in how to get out of debt, follow these 5 tips to succeed.
1. Make a Budget
If you’re serious about learning how to get out of debt free, you’re going to have to look at how much you make on a weekly basis in a sober way. It might not feel great but you need to think realistically about how much you’re bringing in. That’s your main weapon in attacking debt.
Knowing how much you can devote to debt will take some level of sacrifice. In order to know what you need to sacrifice, you’re going to have to get granular.
Carve out how much you can allow yourself to spend on basic things like groceries, housing, and any recurring expenses you have. See how much is left over and start devoting that to paying off debt.
The freedom of being debt free will be a much better feeling than living under its umbrella. Knowing realistically how long you’ll be paying off this debt will help you grapple with the reality. Your budget is like a map to get out of the maze you’ve found yourself in.
Make sure your budget is generous enough. So you don’t spend on a credit card just to pay off a debt. There’s no point in going into debt somewhere else.
2. Consolidate Your Debt
There are several services now that can help you consolidate your debt. If you have student loans, you might be able to have the federal government consolidate them.
Consolidating your loan debt could help you to pay it off in manageable installments.
Check Out This Video About The Pros And Cons Of Debt Consolidation
Refinancing your debt could be another option for paying it off. If you can get a better deal on your loan interest, you’ll be paying off more of the principle when you send in your payment. With a lower interest rate, there will be less coming off the top of each monthly installment.
Finding more manageable ways to approach your debt is the key to being able to take it on. If you can see your payments making a dent in your debt, you’ll be more apt to pay it off regularly and on time.
You’ll have to start making priorities when you want to find ways to get out of debt. Whether it’s if you’re going to be taking a vacation this summer or whether you should start packing your lunch at the office, priorities form our financial reality.
When it comes to the best way to get out of debt, you need to prioritize what debt needs to get paid off first. If you’re worried about paying off a debt that’s low interest, you could be making another loan skyrocket if it’s got a high-interest rate.
You need to start with low hanging fruit. If you’ve got $500 to wipe out a $500 debt, just send that in today. There’s no point in paying off another cent of interest.
If you’ve got one loan or credit card with 20% interest and another with 5% interest, make sure you pay off the one with 20% interest first. You’ll be paying off compound interest for years if you’re always putting off that larger interest debt.
You might have to make some tough decisions but if you have the help of a financial advisor, you might make more informed decisions. Talk to a loan officer at your bank and they’ll help you to contextualize how much you owe.
4. Be Diligent
You can’t afford to slip up when you’re worried about paying off debt. You need to build a small reward system to help and stay motivated. Every time that you send in a loan payment, go and get your favorite $5 coffee drink.
While you might feel a little odd treating yourself like a lab rat, you’ll find you can associate good financial behavior with tasty treats.
This might seem elementary but it’s essential to the diligence of your get out of debt plan. Remaining focused and on task when you’ve got a mountain of debt in front of you is the only way to overcome it.
5. Cut Back
As mentioned before, sacrifices are the backbone of getting out of debt. You might have to make some uncomfortable decisions but it will be worthwhile.
Don’t make any sacrifices that put your health or safety in danger. Keep your home insurance, your car insurance, and your medical insurance. Don’t put off any home payments or car payments just to pay off your debt.
You need to get to work, you need a roof over your head, you need to be able to go to the doctor. What you might not need is to get a second round of drinks out with friends every weekend. You might not need to buy a new pair of shoes until the ones in your closet wear out.
Figuring Out How To Get Out Of Debt Free Take Self-reflection
In order to understand how to get out of debt free, you’re going to have to take a long hard look in the mirror. By being honest about your finances and what you’re capable of, you’ll be able to pay off any current debt and stay out of debt forever.
If understanding your credit score is still a mystery to you, check out our guide to understanding what they mean.
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