Four Steps to Get Out of Debt

If you’re like most Americans, you have a few thousand dollars in unsecured and credit card debt that you carry around each month. Statistics indicate that of Americans who have unsecured debt, the average amount of that debt is about $16,000. If you’re carrying debt, you probably dream of a way to pay it in full – preferably a way to pay it off a lot faster than you ever thought you could. Believe it or not, there are ways to do just that. Here are four powerful tips to get you started.

  1. Focus on one debt first. Throw any spare cash you have at one debt to see some meaningful progress on that account. To get the most financial benefit, choose the account that has the highest interest rate first. To see progress more quickly, choose the account with the lowest balance.
  2. Double up. If you can only make monthly payments, try to make a double payment or another partial payment on at least one account each month. Even small amounts can help chip away at your balance over time.
  3. Take a part-time job. Both of the previous methods require you to pay the minimum required on all your accounts, so unless you have any spare money available – and many people don’t – to increase payments or pay extra, you may need to find a side job to help jumpstart your debt repayment plan.
  4. Register for debt consolidation help. Especially when debts are very big, the first three options can still mean you’ll be paying your debts back for years. To see real progress, you need to reduce the amount you’re paying, and debt consolidation can help you do just that. Debt counseling experts are skilled at working with creditors to slash interest rates and get rid of fees that add up when payments are late or accounts are overdrawn. When monthly payments are reduced, it can be a lot easier to make some real progress in paying back debts. Debt consolidation counseling does not involve taking out additional loans. Programs that advocate taking out additional loans to pay back existing debts are often a quick way to get into even more debt, and they also can involve exorbitant fees themselves, so avoid debt loans at all costs.

Carrying debt can lower your credit score, making it difficult to get a home or car loan, insurance or even a job. Miss a payment and your interest rate may soar. Go over your limit or make a late payment and the fees and penalties can be hefty. What’s more, many studies have shown that carrying debt can cause stress levels to rise significantly, and that can have a direct effect on your health. Credit management and debt consolidation are simple ways to get your debt under control and get it paid back quickly. Today, there are lots of options to improve your financial savvy and reduce debt, so take some time right now to make paying your debt a priority.

Simple Substitutions Help Eliminate Your Debt

use subtitutes to get out of debtSimple substitutions are a great way to eliminate old habits and establish new and better ones. In diet and nutrition, men and women are advised to substitute water for sugar-laden sodas, to use herb mixtures to replace salt and even to substitute applesauce for fats when baking cakes and muffins.

But, diet isn’t the only place where substitutes can work wonders. Substitutions can also help you save money; money which you can then use to pay off debt or grow your savings. The best part: None of these suggestions require a major negative change in your lifestyle; in fact, in many cases, you’ll find your life is improved and enriched.

Have a look at this list, and see if you can think of other ideas that will help you live a better, more financially sound life:

  • Instead of buying a new wardrobe each season, invest in one or two low-cost accessories that can breathe new life into old clothes. Consider classic and time-tested styles or ride the trends and add an item that reflects current style changes. You can also update your wardrobe by visiting consignment and thrift stores; for best results, look for stores located in more affluent areas or those affiliated with hospitals or private schools where you’re more likely to find a selection of designer clothes at rock-bottom prices. Your experience can vary a lot from store to store, so visit several to find the ones you like. Other alternatives: Search eBay and yard sales for like-new items. Again, affluent neighborhoods are your best bet.
  • Instead of going out to eat, surf the Web to find an interesting recipe to try. Even if it requires ingredients you don’t have on hand, it’ll still be cheaper than going to a restaurant, and you’ll pick up new cooking skills along the way. Packing lunch for work is also a big money-saver; avoid boredom and the temptation to go out by incorporating foods with different textures and colors and adding some treats.
  • Instead of buying a costly ticket to a concert or other event, subscribe to a movie-streaming service or get out of the house and look for a local event that’s free or low-cost – and maybe even supports a local group. Or, look for places to volunteer for an hour or two and network with caring people in your area.
  • Instead of paying for a gym membership, walk or ride your bike to run errands locally. Join a biking or walking group to expand your circle of friends and contacts and build a network of people who can support you in your goals.
  • Instead of resigning yourself to high interest rates and late fees, sign up for a debt consolidation program to learn how to pay off debt in a fraction of the time and save money while doing it. Double-charge your efforts by signing up for a debt consolidation program that also offers credit counseling and money management tools, so you can learn good financial habits at the same time as you’re paying off your debt.

Changing just a few choices can have a major impact on your finances. It all begins with a commitment to trying something new, and considering where your old money habits have gotten you, that’s probably not a bad idea.

With Debt Consolidation, Prioritization is Key

debt consolidation priority

Not everyone is in a position to pay off all of their debts when they enter a financial rough patch.  The person who has lost income may not be in a place to repay all debts on schedule as planned.  It’s not that the person intentionally took on the debt with the intent of not paying it off; it’s just that the decision was made when the personal finance situation was entirely different.  The stressful economy has left many households cash-strapped.  In the new economy, people have had to revisit their debts with prioritization in mind.

Unsecured and secured debts should be prioritized differently.  If the person is unable to pay off all of their debts with their existing budget, one has to treat the unsecured debts differently from the other ones.  The unsecured debts can be temporarily put off because there is no collateral attached to the debt.  Hospital bills and credit card debt can be put off temporarily while one focuses exclusively on catching up on car payments or the mortgage.  It’s always best to look at debt in terms of what assets are at risk if no payments are made.  The problem with not paying on any debt is the impact it can have on one’s credit score.  Both unsecured and secured debts can damage a person’s credit if they go unpaid.

Rather than ignoring some debts while focusing on others, there is another option.  Getting debt consolidation help gets a person back on track.  The person can receive counseling and advice from debt counselors who can structure the debts in a way where no payments are skipped.  All debts can be bundled together in a debt consolidation help program and the person no longer has to worry about the consequences of not paying the debt.  Clients appreciate not having to communicate with each creditor to create a series of different payment arrangements while struggling on a monthly basis to meet commitments made with a limited budget.

If a person has to choose between unsecured and secured debts, the unsecured debts should always come first.  The credit score will be affected in either case if payments lapse.  If working with a debt consolidation help group, the counselor will handle all of the arrangements and oversee the prioritization of the debts.