What concrete steps can one take to get out of debt? Here are four steps that can help you in tour process of getting out of debt.
Figure out how much debt you have. You wouldn’t believe how many of us have no idea how much we owe, but we continue to blindly pay off any bills that come in. Do you have a strategic plan for your debt? You can’t make a plan to pay off your debt until you know exactly how much you owe. It might be painful to know the truth, but you need to bite the bullet.
Decide what to pay off first. Not all debts are created equal. Different companies charge you different interest rates, which can affect what you decide to pay off first. There are two schools of thought on how to go about paying your debt. In the Avalanche method, you start paying the account with the highest interest rate, because it’s costing you the most. In Dave Ramsey’s snowball method, you start with the smallest installment, and pay a little more than the minimum on the card- to allow you to pay it off.
Decide where the money to pay off your debt will come from. One common barrier to paying off debt is wondering where the money should come from. Should you use your savings, or any bonuses you get? These questions may be daunting, but don’t let them stop you.
Get started. Within the coming month, you should start paying more money towards your debt. If you are procrastinating, just get started. The philosophy is not to empty every corner to decide where the money will come from, the goal is ACTION. Figure out how much you owe, figure out how you want to pay it off, find the money, and get started. You can always fine tune the plan later, but the idea is to get going.
Being in debt means giving up choices, it may mean staying at a job you hate because you need the money. Getting out of debt is important because it allows you the freedom to figure out what you want to do with your money. Then you can start growing your money significantly and investing.
Congratulations for getting started!
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