Chatsquatch

I am sure most of us are not financial experts, but I bet everyone knows what debt is. Credit card bills, mortgage, student loans… the list goes on and on. I have been trying to pay off a tremendous debt that was accumulated because of medical bills. It’s been a tough road, but the end is in sight. I thought I would share some things that really helped me through this rough time.

10. Create a budget
This was hard for me because I was used to having the bank cards available any time I needed to pay for something. This created a lot of problems for me, mainly overdraft charges. To start, I gave myself a cash allowance. I kept the bank cards on me for a while in case I really needed them, but I tried to live on just the cash in my pocket. After about a month I found out that I not only did not need the cards, but I did not need as much cash as I originally planned. More money to pay off debt - HOORAY!

9. Track your expenses
Since I had to re-evaluate how much my cash allowance was, it was obvious that I had no clue where my money was going. I decided to start tracking my expenses. Part of this was for pure accounting nerdy-ness, but most of it was out of curiosity. I have used a few programs out there and have recently started using Expensr. It’s free and (so far) works pretty well. After I started tracking every purchase, it became very clear that I need to make some adjustments…

8. Learn from your mistakes - or - Time to get frugal
I saw how much I was spending; now it was time to fine-tune things. The first thing I did was stop going out to eat all the time. It was so easy to just grab a meal at my favorite fast food place for lunch, but it was costing me $5.00 or $6.00 per day. So I started making my lunch which saved me about $3.00 to $5.00 per day! There were some other cutbacks made… they were difficult, but it had to be done.

7. Stop trying to keep up with the Joneses
I know people who must have the best house, the fastest cars, the biggest television… that will only lead to one thing; the biggest debt. If you are trying to eliminate debt, you are going to have to focus your income on more important things than a new flat screen television. I am not saying that you need to stop spending money, just stop spending it frivolously.

6. Make your debt easy to manage
If you are paying bills to several different companies, you need to think about consolidating your debt. However, avoid debt consolidation and debt management companies. You can do the same thing they can for free. The first thing you need to do is stop using store credit cards. It might get you 10% off your purchase today, but they will charge you 24% tomorrow. Plus, consolidating cards makes it easier to pay bills and avoid late fees.

5. Plan a reward system
You must reward yourself for doing this. If there is no reward, the end will seem to drag on and on. You can choose to reward yourself after small accomplishments, but you have to keep the rewards small. For example, if you want to reward yourself every time you pay off one of your 8 credit cards, make it something small like a new video game or a trip out to a fancy restaurant. If you plan for a monster kegger party that will cost you hundreds of dollars every time you pay off a credit card, then you are going to stay in debt longer. Use that money to pay more cards off. And make sure you pay cash when you reward yourself!

The reward system that works best for me is giving me the amount of money I usually put towards debt once I am debt-free. Let’ say I pay $1000 per month toward debt and it will take me 6 months to be debt-free. I planned for 7 months of paying $1000 and give myself the last $1000 as a reward.

4. Decrease your interest rates
You need to get your credit card interest down as much as possible. After you have consolidated all your credit card debt onto one card, call the company to see if you can get a lower interest rate. If not, switch to a card that will. I promise you that when you call your credit card company back and let them know you are switching, they will offer up a lower interest rate. Some more ideas for lower rates:

• Switch to cheaper car insurance plans
• Refinance your student / college loans
• Refinance your mortgage / home loan

Low interest rates do not last forever! Once you find some terms that you are comfortable with (we were lucky enough to find 6 months at 0%), make it your goal to pay off as much as you can during that time. Try not to be a card-hopper. These are the people that switch from card-to-card trying to keep the interest rates as low as possible.

3. Earn extra income
You don’t have to take a full-time second job, but you need to work a little harder to rid yourself of debt. Do some odd-jobs when you can to bring in some extra income. Mow lawns, fix computers, babysit… whatever you can find. If you need to, go get a part-time job. Be sure to tell your current employer that you are getting a 2nd job and also tell your new employer that the job is just to help pay the bills (and is not a permanent job). If a part-time job is not an option and you just need a little more extra income, try asking your current employer for a raise.

2. Pay extra towards debt
This is a big one. It almost made number one for me, but I think number one is more important. You cannot pay the minimum and expect to get out of debt anytime soon, especially if you are paying on high-interest credit cards. If you are one of the lucky ones to have 0% interest, you still have to pay more than the minimum required amount! Don’t run yourself into the poor-house by paying more toward debt than you can afford, but pay as much as possible.

1. Be committed to your goal!
This means you and everyone that is affected by your debt! Everyone has to be 100% committed to getting rid of debt. You cannot be paying more to your credit card debt at the same time your spouse is going on expensive shopping sprees. Don’t blame other people for racking up debt. I am sure you are just as responsible for it as they are (I know I was). This is a team effort and you need to treat it very delicately. It’s tough now, but how great it will be when you have all of that cash freed up after your debt is gone!

This was all taken from my own, personal experience in lowering debt. If you have some more suggestions I would love to hear them. Send me a comment and let me know what helped you get out of debt.