These days we live in a culture where debt is ordinary. Everybody has a car loan. Everybody has half a dozen credit cards. Everybody has a mortgage (or two). Everybody has a mountain of student loans. Sometimes, though, all that debt can start to wear on you, and you start to feel like you owe your soul to half a dozen banks. You want out, but you’re not sure how to get there from here. The purpose of this article is to provide you some simple debt relief advice that will help you dig your way out.
Get on a Budget
Before you can start getting relief from your debt, you have to figure out just where your money is going every month. Start by tracking your spending for a month. Figure out exactly how much money you are spending on things like restaurants, clothes, trips to the movies, gadgets, or other expenses. Once you figure out how much you make and how much you spend, start making cuts so that the amount of money you have going out is less than you have coming in.
Getting a basic budget in place – figuring out where your money is coming from and where it’s going – is the single most important step in getting your debt under control, and it’s the first piece of advice you will get from any financial counselor you talk to.
Stop Using Credit Cards
It may sound simple, but the second most important piece of advice about debt relief you need to hear is one that doesn’t occur to a lot of people: if you want to get out of debt, stop adding to your debt by using things like credit cards. The simple truth is that you aren’t going to dig out from under that mountain of debt by tossing more rocks on the pile. Once you have your budget in place(and are sticking to it) you should find that it isn’t actually all that hard to live within your income, which means you don’t really need the credit cards any more after all.
Start Attacking Your Debts
Once you’ve gotten yourself on a budget and have put away the credit cards, it’s time to start going after your debts. The best way to do that is called the snowball method, and fortunately it’s pretty simple. You start by listing your debts according to size, starting with the smallest first. Then you start throwing as much extra money as you can at it until it’s gone. From there, you take all the money you were putting toward the smallest debt and apply it to the next smallest, and so on until each debt is gone.
Now, some financial advisors will tell you to go after debts in order of interest rate, rather than by size. While that makes good financial sense, research has shown that starting with the smallest debt is better psychologically: knocking out smaller debts first gives you a sense of accomplishment that makes it easier to keep going when you get to the larger debts.
Getting out from under your debts isn’t easy, and it isn’t always fun, but if you follow this basic debt relief advice, you’ll discover a sense of security and peace of mind that no credit card can give you.