By Jon Robinson
There is no shortage of advice available about how to tackle the problem of debt in your personal finances. Everything from credit counseling services to television presenters would all like you to think there is a magic bullet to easily brush away all of your financial burdens.
The truth is, YOU are the only one who can control the problem of personal debt and only you can fix it. Common sense, personal discipline, and setting yourself goals will put you on your way to relieving yourself of the many anxieties associated with personal debt. Let’s look at a few ways you can get started on the path to being debt free.
#1. Review your current debts versus your income and map out a plan to pay down your obligations. This may sound like the most obvious thing in the world, yet many people with out-of-control debt don’t have any repayment strategy in place and simply make minimum payments on everything. While creditors love this scenario, it will keep you mired in debt. Make some coffee, sit down with all of your financials, and take stock of your current economic situation. Knowing where you stand with personal debt and income will help you make positive changes to your financial picture.
#2. Once you have your financial picture mapped out, prioritize your high-interest debt obligations and make adjustments to pay those off first. Any extra income you can put towards paying off high-interest credit cards or loans will put extra money in your pocket down the road.
#3. Create an emergency savings plan. Set a goal to create at least 1000 dollars in savings to use should you have an unforeseen emergency. Having this cushion when a need arises will keep you from adding to your debt. Pay yourself first. Even just 5 dollars a week put in savings will eventually add up.
#4. Leave your credit cards at home and start paying cash. Stop piling on debt to your existing lines of credit if you are making minimum payments and pay for your incidental purchases in cash. Put yourself on a weekly cash allowance and make an effort to stick to a weekly budget for regular expenses.
#5. Find extra money in your budget by trimming the fat. Now that you have reviewed your finances, it’s time to dig in and look for things in your budget that could be eliminated to create more cash. You may hate to cook, but bringing your lunch to work instead of eating out multiple times per week is one easy way to generate extra cash. Magazine subscriptions, cable television, internet access, and phone bills are all good examples of things you can eliminate or pare down to give you more money to pay down debt.
#6. Become a pawn star. Take a look in those boxes you forgot about in the attic and see if you might have a hidden gem you can part with to generate some extra cash. Old cameras, guitars, or antiques which have no sentimental value could be potential income makers when you take them to a pawn shop. You might also consider selling any broken or ugly gold or silver jewelry, as both metals are bringing record prices at the moment.
#7. Want to buy something new and shiny? Save for it first and then purchase it. To get out of debt, you should only purchase the necessities you absolutely need. Financing your vacations, a stereo, or a new sofa on your credit card is a really bad idea. If you can’t afford it and pay for it right now, don’t buy it.
#8. Brainstorm for ways to make extra money through side work. If you have time to watch T.V. or surf the internet, you have time enough in your schedule to dedicate towards making a few extra bucks on the side. Even in a tough economy where employment is tight, you can have a garage sale, sell stuff online, or figure out a way to monetize your blogging to pull in some extra cash to pay down those debts.
#9. If your interest on credit cards is becoming unmanageable, consider an alternative loan. While many would consider this poor advice, sometimes a low-interest loan is one solution to paying off high-interest debts to get you back on track financially. Do you have a family member or a 401k balance that you could tap to eliminate your debt at a lower or no-interest payback? You may want to consider this when you have no other options, but proceed with caution and make sure you understand the fine print before you consider this a solution.
#10. Change your spending habits. The sooner you begin to live within your means, the faster you will be able to become debt-free. This is the hardest lesson to learn for most people with out-of-control debt. If you love to shop, make shopping a game of saving by utilizing coupons, discount codes, and sales to get the best prices on the things you purchase, and use that savings to apply to your debt reduction.
As you can see, there is no magic bullet to eliminate your debt, but if you can modify your relationship to how you spend and save, you can make great progress in working towards becoming free from the endless cycle of consumer debt.
Jon Robinson is a Consumer Financial Advocate for Debt.org. He has more than 7 years of writing experience in personal finance.
