How To Get Out Of Debt
The method for how to get out of debt is pretty simple in theory: make your finances so your income is greater than your bills and other debts. However, if the reality of that statement was as simple, I could end this article on this sentence. We all know better than that, right? So, here’s a list of tips you can use to get that fiscal monkey off your back.
Maximize your income
One of the first things you should do is make sure you are making as much as you can at your current job. Figure out the last time you had a raise. If it has been more than a year, perhaps you should consider asking for one. Look for opportunities to get promoted at your job. You want to be compensated as much as possible for the time you are spending at work.
Look for additional sources of income
While making the most at work is important, you shouldn’t leave out other sources of income. Do you have any special talents? See if a skill you have can be turned into a source of income. It could be as simple as running errands for other people for a fee. Yes, people do pay for services like that.
Pay off credit cards first
The big daddy of debt creation, credit cards and their obscenely high interest rates are sadly what is causing a large portion of debt these days. If you have any credit card debt, do yourself a huge favor and pay it down first. The monthly finance charges you incur with credit card debt are a huge drain on finances. Whatever you do, don’t just pay the minimum monthly balance on your card! In many cases (especially if you are still charging on the card), the minimum monthly payment will barely cover the monthly finance charge!
Use balance transfers, but with caution
Oooh those sneaky credit card companies and their balance transfers! You might want to keep an eye out to see if your card is offering any special balance transfer at a low interest rate. A lot of cards will offer you low or even zero percent interest for a period of time. You should watch the fine print, however. These balance transfers often come with a “transaction fee” which may not be worth it. Also, if you do one of these balance transfers, don’t use the card for further purchases! If you have transferred a balance and then start purchasing with the card before the transferred amount is paid off, you will be charged the regular interest rate on your new purchases. If you’ll pardon the expression, that is where they get you.
Watch incidental purchases
You should know the difference between the necessities of life and the luxuries. Your rent, mortgage, utility bills should be paid first. Make sure you allow money for groceries and meals. Beyond that, be careful of having too many incidental items like cups of coffee, magazine subscriptions, that DVD you just HAD to buy, etc. While a small purchase here and there doesn’t seem like a lot, it can add up to a considerable amount of money over a year.
Don’t starve yourself!
At the risk of talking out of both sides of my mouth, while you are busting your hump making as much as you can and trying to pay off debts as much as you can, make sure you don’t run too thin. Take a little money and occasionally treat yourself. You don’t want to get to the point of having starved yourself of every conceivable luxury for months on end until your debt is paid off. A little balance in this can go a long way. Periodically treating yourself might keep you from going hog wild one day and heading back down your road of debt.
As someone who has gotten into and out of debt for over 20 years, I can tell you it is a work in progress. Keep to it, don’t give up and try and relax!
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Add comment January 17th, 2008
