Top 10 Tips for getting out of debt
There are a lot of reasons why people fall into debt such as slow economy, job lay offs, or unexpected events. For most, however, debt is the result of extraneous spending, poor money management or both.
Here are 10 tips that are tried and tested ideas that really do make a positive difference to getting out of debt. Some are easier to follow than others, but all are proven to help get out of and STAY out of debt.
1. Create a realistic monthly budget.
List all monthly bills and necessities such as mortage/rent, electric, water, phone bills, as well as food, gas, and clothes. Make sure they are covered by your monthly income. Allow only the money remaining after the bills are paid to be spent elsewhere. Stay within your budget guidelines.
2. Pay off high interest rate credit cards first.
Then, get rid of the credit card and next month do the same with the card that has the next highest interest rates. Continue until you reach the credit card with the most favorable terms (i.e., low interest rates) and keep that one only.
3. Learn to use cash instead of credit cards.
Have one credit card and use it only for emergencies or major necessities, such as a new refrigerator if the current one stops working. Put your credit card in a safe place, not available for everyday use such as your wallet or purse, instead keep it in a safe or lock box. Also, do not accept increases on your credit card limit as this will only in.
4. Use direct deposit for your paychecks.
For most people the first thing they want to do when they cash that paycheck is go buy something. Using direct deposit elimates that urge since you never see the money. Also have a limit on how much you will allow yourself to withdraw each week and month.
5. Reduce Personal & leisure expenses.
This includes dining out, going to the movie theater, buying the latest fashions, overusing your cell phone and other such unnecessary expenses.
6. Evaluate your living situation.
Your housing costs should be no more than 33% of your household income, including mortgage payments, property tax and both property and homeowners insurance. If needed, you can shop around for lower insurance rates, refinance your home mortgage and look for more economical utility plans.
7. Avoid borrowing money to get out of debt.
Many people think this is a way of helping them get out of debt. However, consolidation loans are simply a means of combining debt. You could end up losing everything because you've tied it all up in one loan. If you must borrow, see if a friend or family member can lend you money, since the interest rates should be low or non-existent.
8. Contact your creditors and try to work out repayment plans.
Many creditors are more then willing to work with you in a manner that will help reduce your interest rates or even monthly payments. Creditors would much rather get their money back without having to resort to debt collectors.
9. Become a savvy shopper.
Look for deals, bargains and savings. You'd be surprised at how much you can save if you take the time to shop around. Check out the price comparison Web sites, such as AllBusiness.com, Shopping.com and BizRate.com.
10. Look for extra ways to make some money
You'd be very surprised how much extra you can make from part-time work to a garage sale to taking in a roommate, there are many ways to bring in some additional income.