7 Steps for Getting Out of Debt

If youre like most people today, chances are you have some outstanding debt that you would like to pay off. Whether its in the form of credit cards, home equity loans, car payments, or even student loans, debt can cause stress and even affect your level of happiness. With the recent increase in both personal bankruptcies and home foreclosures, its no secret that our society has a growing problem when it comes to handling debt. The thought of saving for the items we need is a foreign idea to most of us. If youre tired of living paycheck to paycheck or just want to rid your life of the worries associated with debt, there are some steps you can take to ease your financial burden. By following the suggestions listed below, you are taking the first step towards a debt free lifestyle.

1) The first step in getting out of debt is to realize how you got into the situation in the first place. You cant actually fix the problem until you know what caused it. Some situations, such as losing your job or having to pay outrageous medical bills, you cant control. However, most people who are in financial trouble have poor spending habits. You need to learn how to better manage your spending before you can get out of debt.

2) After youve discovered what caused your financial problems, you need to set up a budget. The mere sound of this word often makes people uneasy but a budget doesnt have to be all bad. In order to take control of your financial future, a budget is a must. Start out by making a weekly, monthly, and yearly budget. Check your spending habits with your budget on a regular basis. Do not worry if you fall a little short of your budget goals. The important thing is that you are aware of how your money is being spent.

3) Call you local Consumer Credit Counseling office. They offer many classes on managing debt and how to budget your money. Best of all, some classes are offered for free. The only stipulation is that you may be required to not use any of your credit cards while you are participating in the program.

4) If you have fallen behind on any of your payments, try calling your creditors and explain to them that you are having difficulty making your monthly payments. Many times creditors will work with you to lower your monthly payment amount. Most companies would rather work out a revised payment plan with you than refer your case to a collection agency.

5) Try to cut back spending on items that arent really necessary. Many times people become accustomed to things that are a luxury but not a necessity. For instance, do you really need that weekly manicure? There are also ways to save on other items like gifts and meals. Presents for family and friends shouldnt take months to pay off. Most people are happy just to know you thought of them. Going out to lunch with friends can really put a crimp in your budget. Instead, bring your lunch to work and only go out to lunch on special occasions. Youll be surprised how much you can save each month by doing this.

6) If your level of debt has become so great that you cant manage on your own, seek the help of a credit counseling agency or a company that specializes in debt management. Although it will affect your credit, there are options available for people who have debt over a certain dollar amount. Qualified counselors can contact your creditors for you and reduce your monthly payments. They will set up a payment plan that you can handle and may even be able to reduce or eliminate your interest charges. Lowering your interest rates will help you save thousands of dollars and shorten the time needed for repayment.

7) As a last resort, bankruptcy is an available option. However, before you consider filing, make sure you have exhausted all other options. A bankruptcy will affect your future credit rating and will be listed on your credit report for several years. It will affect the interest rates you receive on future purchases, such as auto loans. Before filing, make sure you have a qualified attorney to explain which type of bankruptcy is best for your personal situation.