Falling in debt is a situation that is easy to get into but hard to get out of because of one thing: discipline. Lack of discipline caused the debt to pile up, and discipline is the one thing that will eventually erase it.
The good news is that with a little will power (and these steps) you can slowly take charge of your debt and eventually pay it off. It’s not easy, but it’s not impossible. But isn’t the goal worth it? You can finally free yourself from that financial burden, improve your credit score, and achieve the financial freedom that you deserve.
1. Get a clear picture of how much you owe and how much you can pay.
First, you should look at your finances and find out how much you can allocate for servicing your debt. One effective way of eliminating your debt faster is by using your disposable income to service your debt. Sit down and list all of your monthly expenses then deduct this from all of the income you receive each month. Any extra money you have can be allocated to pay off your debts.
2. Find additional sources of income.
If all the soul-searching in tip # 1 reveals that you have no extra income at all to pay off your debt, then you may have to find extra sources of money. Resist the temptation to use those additional funds on a “well-deserved” shopping spree. Yes, you need a reward for all that hard work, but the best reward is financial freedom, right? Stay focused on your goal and immediately direct your income to your debt payments.
3. Pay more than the minimum requirements
No matter what kind of financial situation you’re in, at the very least try to pay the minimum payment due on your credit statements. This is important to ensure that you won’t get a negative credit rating. However, minimum payments only cover the interest on your debt. To erase your debt, you need to pay for the principal (or the original amount of money you borrowed).
To do this you have to pay more than the minimum amount — the maximum you can afford. The more you pay, the faster you’ll be debt-free, and the less you “waste” on interest payments.
4. Cut up your credit cards.
Seems radical? But it could be the only way to prevent you from adding to your debt. Besides, forcing yourself to use cash instills financial discipline and teaches you to live within your means — the very habits that will prevent you from having any debt problems in the future.
5. Consider debt consolidation.
Debt consolidation means putting all of your debt into one credit company. This is an easier option for because you won’t have to juggle different credit statements every month. Many debt consolidation packages also offer lower interest rate or “suspended” interest rates within a particular grace period. This can significantly help to reduce the debt you need to pay off.