Ways to Get Out of Debt can be hard to figure out. Even when there isn’t a recession, for some, the question of ways to get out of debt hangs around at the back of the brain, niggling away but generally ignored. You know that you won’t get out of debt by denying the problem and you know that you won’t get out of debt by taking the ostrich approach to the problem. Debt problems are usually down to emotional as well as financial issues, and we need to make sure that we look at both if we are to make long lasting changes to our spending habits as well as addressing how we save. So put those new shoes back on the shelf ladies and let’s look at the 7 Best Ways to Get Out Of Debt together.
1 Collate the Information
Before you can make a plan on all the ways to get out of debt, you have to gather all the financial information that you have about your spending to build a clear picture of the situation. Beware girls, this picture may not be the prettiest you have ever seen but it really will help in our goal to get out of debt. Collect together:
• Account information re: accounts, loans and credit cards, including who you owe, the amount you owe, the date of the last payment, the minimum payment and interest rates that are payable.
• Asset information for all holdings including the type of the holding or the property, its current value, the rate of its return, maturation dates as well as the cost and tax basis.
• Monthly expenses; categorize all expenditure and remember to avoid using the miscellaneous category as a cover for any unmonitored spending.
• Insurance cover, including employee and individual benefits, detail the types of policy, the cost as well as some rationale as to whether to continue the policy.
2 Develop a ‘No Frills’ Budget
When you’ve got an overall sense of the debts, you will be able to make a realistic budget that will allow you to live but that does away with frivolous spending. Make sure that you include your spouse and family when making the budget as this will increase its chances of getting you out of debt. You will need to think of ways to introduce new habits when shopping and spending, think about:
• Making a shopping list of what you need before you go to the supermarket.
• Tracking all monthly expenses.
• Reconciling your check book every month.
• Keeping receipts for cash purchases.
3 Make Getting out of Debt a Family Affair
When the budget has been written down and target dates established, organize regular family meetings so that you can all monitor progress together and identify any areas of weakness to amend the budget for events that are coming up if necessary. As well as tracking what money is going out at this stage it's a good idea to also write down what money is coming in to make it easier to identify the spending which is unnecessary. One of the easiest ways to get out of debt is to cut back on ATM visits - it’s harder to track cash spending than check writing.
4 Contact Your Creditors
Once your debts have been identified, contact your creditors and set up plans with them to reduce the re-payments to a manageable level. I know this can be scary, but remember your creditors will be happier to know they are going to get their money back over a longer time than not at all. Come on girls, you can do this, we can do this.
5 Look for Ways to Reduce Your Debt
Have a family brainstorming session. Then, look at ways to get out of debt. Figure out how to use any money that is available to get rid of as much debt as possible as quickly as possible so that you don't end up paying out even more money in interest payments.
6 Develop Emergency Cash Reserves
Even when you are in debt it is important to have a contingency pot to cover unexpected expenditures; try to commit to saving a small but realistic amount of money each month and increasing the amount every month, little by little. The goal here is to gather between three and six months worth of expenses. (Tip: refer to step 2 to set and achieve this goal).
7 Plan Mid and Longer Term Financial Goals
As you carry on reducing your debts and start to feel more in control and optimistic about the health of your finances, begin to detail your future financial goals and develop ways to achieve them with your new ways to get out of debt.
There are many ways to get out of debt. I know it’s not the most exciting of pastimes - who ever said budgeting and financial planning was fun but if you make some of these ways to get out of debt part of your financial management routine they will become second nature. Once you’re free from overburdening financial obligations you are unlikely to fall into the same situation again and everything you have learnt will hold you in good stead for the rest of your life. The 7 Ways to Get Out of Debt are not just about getting creditors off your back, but about taking control. Do you have any debt stories you’d like to share?
Top Photo Credit: caston_corporate