Getting out of debt doesn't just happen by accident! I wish it did. That would be fabulous! But, unfortunately, debt does not shrink just because we "Will" it to. I am a true believer in setting goals to getting out of debt. Give yourself attainable milestones. I promise that the amazing feeling of checking off one of those goals with be totally worth the hard work and sacrifice to get there.
Here are some of the goals I have set for myself in the past.
1. Calculate Total Debt (Credit Cards, Loans, Cars, Mortgage, etc...)
You have to know how much you owe before you can make a realistic plan to conquer your debt. Don't just write down how much you owe, but list the interest rate and the lowest monthly payment due each month. (You will use this later)
2. Calculate Your Total Monthly Income
How much do you bring home each month? This is most likely the simplest step as we usually are quite familiar with how much we make!
3. Create A Budget
This step is so crucial! Do NOT skip this step! Write down your monthly expense from the last six months to give yourself a good picture of what you normally spend a month. List every single bill. Water, Heat, Gas for Cars, Mortgage, Cable, Internet, Groceries, etc... Notice patterns of spending. Do you regularly stop for coffee in the morning? List that in your budget as an expense.
4. Order Your Debts in Order of Smallest Amount to Largest Amount
I cannot stress the importance of organization when tackling your debt. The ability to clearly see everything you owe in one place in order will keep you focused.
5. Call Loan officers and request lower interest rates or negotiate new terms for loans and credit cards
This is a big step. Realize that you may be on the phone for a few hours, but it will be worth it if you can save yourself even 1% interest! Don't be discouraged if they will not negotiate. You will never know unless you try.
6. Begin paying off smallest to largest debt OR lowest to highest interest.
I recommend the "Snowball" payment system. Pay the minimum on every card except the lowest interest or smallest debt. Concentrate on one card at a time. Put every extra dollar you can spare towards that one card and get it paid off! When the first card is paid off, use all of the money you were putting towards the first card and put it to the next lowest card. (And so on) It may take a little time to pay off the first card, but the next will go much faster and continue to pick up momentum until everything is paid off.
Setting goals is a first step to getting out of debt. Making a clear path to freedom is very exciting! Don't get overwhelmed. You may have to adjust some of your goals, but don't give up! Keep at it! I believe that you can get debt free and find freedom!