By definition, debt is an amount owed to a person or organization for funds borrowed. For many, borrowing cash or getting something on credit is a quick fix for money problems. However, the real problem starts when the debt starts to increase. In these tough times, staying debt-free may already be considered an accomplishment. However, economists believe that paying off debt can be easy if you are really focused on doing it.
Here are three simple steps that will help you get out of debt:
- Stop getting new debt. If you keep on adding on your things-to-pay list, your debt will eventually get out of control. Stop using your credit cards because they will put you deeper in debt.
- Save cash for emergency. You might be asking yourself “Why do I need to save before paying off a debt?” Simple – saving is more important than paying debts. This is because saving can help you cope up with unexpected expenses.
- Implement a debt snowball. Steps one and two may take you several months. The next logical step is to for you to pay your debts. It would be easier if you will pay your debt in increasing order. Settle the lowest balance first and then gradually pay the bigger debts until you pay off the highest. Set aside a specific amount to pay for debts every month. Always put your extra money to pay off your debt with the lowest balance.
Coping with debt is a long term process but if you have enough willpower, you will be able to get out of debt even if the economy is down. Here are additional tips to help you settle your debts:
- Find additional income. Signing up for overtime, doing consulting or finding a second job can help increase your income and decrease your debt balance.
- Downsize when necessary and possible This may sound difficult but the sacrifices will be worth it in the long run. Moving from a big house to a smaller one, selling one of your cars, eating at home instead of eating at fast foods and restaurants and decreasing your expenses can save you a lot of money to pay for your debts.
- Keep your credit cards at home. Buying only what you can and paying in cash can help you stop adding more debts.