How to get out of debt

This might sound nonchalant but the truth is that the most important and often hardest step to get out of debt is to decide that you want to get out of debt. Everyone have unnecessary expenses and everyone can save money. It might not seem like that when you are living paycheck to paycheck, when the money is always running out before the end of the month but this does not make it any less of a truth. If you want to be able to get out of debt you must be willing to make sacrifices and you must be willing to take an honest look at your finances.

debt settlementOne way to do this is to keep a exact record of all your expenses during one month. If you do this you are likely to find out that you are allowing yourself a lot more luxuries than you might think. It will also allow you to see how much money you can safe by buying certain items in bulk from a discount store. There is a lot of money to be made by shopping at the right place and by buying the right food for the season.

Once you have kept your record for one month you should look at the data you collected and see how much money you spend on certain things each month. Some of the things that are likely to cost you more than you expect are candy and other snacks, eating out, alcohol, transportation and entertainment. Most of us do not realize how many indulgences we allow ourselves in our daily lives. What we think of as a innocent luxury has actually slowly turned into an expensive wise.

If you really want top be able to get out of debt you should cut hard into your budget. Cut everything that is not necessary. Necessary does not mean that you want it. It means that you need it. You do not need cable TV if you have internet. If you do not use internet a lot you do not need it in your home. You can use internet at work instead. Internet can however be a valuable tool to increase your earning and decrease your expenses.

credit cardsEveryone can reduce their expenses. By living more frugally now you will allow yourself to live a much richer life once your debt has been paid of. Remember that you are not just paying back the money you have borrowed. You are also paying fees and interest every month. Money that is completely waste and that can allow you a richer life once the debt is paid.

When you first start looking at your debt it can feel hopeless to try to get out of debt. It feels like it is going to take forever. The truth is however that it usually is a lot easier to get out of debt than you might expect. You are looking at how long it will take to pay all debt paying the monthly fee. Your goal should however be to pay more than that. By paying more than you have to you will reduce your monthly payment and be able to make larger and larger extra payments each month. This makes it a lot easier to get out of debt than most people realize. This is something that many people who start to pay of their debt quickly discovers. An example of this is my Swedish friend who blogs here. He was able to pay of his debt a lot quicker than he expected.

Making extra payments is also an excellent way to stay motivated. The progress you see makes it easier to succeed.

Below I am going to share a of my best tips to get out of debt.

  1. Cancel your newspaper and magazines. Read online instead.
  2. Make a lunch box.
  3. Cook bulk dinners that are cheap to make and delicious. The last many days and allow you to eat cheaply.
  4. Create a dinner club with your friends. That way you can get the experience of eating together without having to pay restaurant prices. You can eat better tastier food at a fraction of the price. I am sure that many of your friends would welcome the idea as it would  allow them to save money too.
  5. moneyCancel your cable TV. It is a luxury. Especially when compared with other services such as Netflix that offer better value for less money.
  6. Pay of your small credit first. This will help you feel that you make progress and helps keep you motivated.
  7. Forget about your mortgage. Focus on your other debt. A mortgage free life is a blessing but getting rid of all your other debt is a good start and enough to have a huge impact on the quality of your life.
  8. Walk instead of taking the car. It will save you money and improve your health.
  9. Do you need a gym membership. Many people keep a membership but doesn’t really use it. If this is the case than it is better to avoid the cost. In many areas it is possible to jog or bike in parks and green areas. This gives the same benefits that you get at the gym and is free.
  10. Reduce your alcohol consumption. Alcohol is expensive and unnecessary.
  11. Stop eating candy and other snacks.
  12. Pay all your bills on time to avoid extra fees.
  13. See if you can switch to a cheaper phone plan. Can you get by with a smaller data plan. Consider getting an Android phone instead of an iPhone. An Android phone of the same quality cost a fraction of the price of an iPhone.
  14. Check your insurance coverage. Can you reduce your cost by changing provider. Are you paying for coverage you do not need?
  15. Make an extra payment on your loans at the beginning of each month. It is easier to do without the money if you no longer has it.

And finally my number one tip for getting out of debt. Try to get a second job or work overtime. By working overtime or a second job you will have less time to spend money while at the same time earning extra money that you can use to pay of your debt. Getting a second income is a large sacrifice to make but it will allow you to see your debt decrease very quickly.

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