How to Get out of Debt
How to Get out of Debt
Today, more people are in debt than at any other time in recent history. Some are managing to keep their heads above water. Others are struggling desperately to pay down or eliminate their debt. It is not an easy task, but it can be done. Admitting that you need debt help in Birmingham is nothing to be ashamed of. If you are serious about getting out of debt and living a stress-free financial life, here's a great way to get started.
Twelve steps to financial freedom
1. Perform an honest assessment of your debt-to-income ratio. Some debt, including car payments, rent, and mortgages, is inevitable. Other kindslike what you owe on credit cards and personal loanscan drive you deep into debt before you realize it. At the heart of most consumer debt problems is the habit of spending money that you don't have.
2. Put an end to non-essential spending. Keep track of what you spend money onevery day, every week, and every month. Is your morning latte stop really necessary? Or could you get by with coffee you brew at home and transport to the office in your travel mug? The $2.00 you spend every day may not seem like much. But over time, it adds up.
Above all, leave your credit cards at home. If they are not in your wallet, you cannot purchase unnecessary or frivolous items with them. If you want to keep one credit card with you for emergencies, ask for a low credit limit. That way, you won't be tempted to buy things you do not need or cannot afford.
3. Make small cutbacks in your spending. If you save a few dollars every week, over time you'll see a positive difference in your bank balance. Once you are in the habit of trimming your spending, you can use the money you save to start paying down your debt or to establish your emergency fund.
4. Start an emergency fund to pay for unexpected emergencies. There are many opinions about how much you should have in an emergency fund, ranging from three months' salary to eight months' salary. It may take you some time to build up to that amount. But even if you manage to save $1,000, you'll have cash on hand to pay for unwelcome surprises like car repairs or medical expenses.
5. Make a spending plan. It is important to know what financial obligations you have and when they need to be paid. Start by listing your recurring expensesincluding making a deposit to your emergency fundand their due dates. After you have captured those expenses, you will have a clear picture of how and where your money goes. If you discover that your expenses exceed your income, it's time to make some additional adjustments in your spending habits.
6. Control your spending by operating on a cash-only basis. In these days of super-high technology, the old-fashioned method of creating envelopes for each expense and putting cash in each one to cover them seems time-consuming and tedious. But it works. When you're out of cash, you have no choice but to stop spending.
7. Pay your bills on time. You will see the balances start to decrease and avoid costly late charges.
8. Create a repayment strategy. Start by ordering your debts from the smallest amount owed to the largest. Beginning with the smallest debt, pay an additional $100 plus your minimum monthly payment, until that debt is paid off. Then, take that monthly payment plus an extra $100 (for a total of $150) and add that to the next smallest debt. If you continue this process with each of your debts, one at a time, you will eventually pay them all off. Then you can take that money each month and deposit it in your growing emergency fund.
9. Look for even bigger ways to cut spending. Can you trade down to a smaller, less luxurious car? Or downsize to a smaller home? Actions such as these can make a huge difference in your financial picture. Any money you save can be used to pay your outstanding debt. To receive Birmingham debt advice it is important to contact an experienced attorney in the matter.
10. Increase your income. The obvious way to do this is to ask for a raise or get a better job. That's not always possible, so it may be time to get creative. Can you start a small business? Start freelancing? Work part-time? Every little bit of extra money you can make will help you lower your debt load.
11. Track your progress. Over time, you will start to see results. As your track your repayment progress, you will start to see one bill after another being paid off and disappearing from your financial radar. That alone is motivation to keep going. Debt management in Birmingham is an accomplishment to be proud of.
12. Celebrate your success! This process isn't easy or painless. But the financial freedom it brings to your life is worth more than anything you bought on credit. So celebrate! But do it within your means.
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