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How to get out of financial debt

April 13, 2018

It’s deceptively easy to get into debt, but knowing how to get outof debt can be tough once the delinquent bills start to stack up. But there are some practical things that anyone can do to begin the long climb from a deep financial hole.

First, create a balance sheet of your current financial situation. This should list all of your assets and all of your expenses. Also list your recurring income and expenses – things like salary, investment income, bills, mortgages, and so on.

Before you can start to get out of debt, you have to know where you are starting from. You need to know exactly how much you owe, something that the average family does not know. A balance sheet will give you this information.

A balance sheet will also, by laying out your financial situation in such stark black and white terms, show you how you managed to get yourself into this situation and help you to avoid making the same mistake in the future.

Put yourself on a budget. Not that you know your financial situation, you can start to address your debt problem. Having a budget will make you aware of how much you are spending and help to keep you within your spending limit.

Putting together a budget helps, even if you don’t always follow it, simply by making you aware of your incoming monies and outgoing expenses. But, of course, once you create your budget, you should make your best effort to follow it.

If you have more than two credit cards, get rid of them all except two.

Keep one for everyday use and the second one for emergency uses. Most people that get in trouble with debt can blame it directly on their credit card use. Limiting the number of cards you carry to two, helps you to better keep control of your credit card debt.

Call your credit card companies and try to negotiate a better interest rate for yourself. Credit card debt remains one of the biggest income drainers in the typical American home. Credit card companies also typically charge the highest rates of all debtors.

If your credit has remained good, many credit card companies are more than willing to negotiate a lower interest rate with you in order to keep you as a paying customer. But you have to ask.

And then begin paying off those . Paying the minimum balance each month will not help you at all. To get out of debt,  your goal has to be to pay them completely off. Not all at once, but one by one.

Start by paying off the card with the highest interest first while paying the minimum on the remaining credit cards. Then pay off the card with the second highest interest rate, and so on until all of your cards have been paid off.

Getting out of debt can be a challenge, to be sure. But if you are serious about it and are able to follow your plan, it’ll be tough but you should be able to make it through ok.