With so many people now struggling under large debt burdens, along with job insecurity, you can almost hear people pleading: Get me out of debt! Many of us probably wish today we hadn’t accumulated so much debt, and had started paying it down all those times in the past when we swore we were going to pay off balances.
Getting out of debt is simple, but not easy. It takes some patience, and most of all a plan. We aren’t used to financial planning, now, are we? As long as there was cash available on the credit card, we bought stuff! Well that “plan” isn’t going to work any more. Many people have been using credit lines as a substitute for additional income, as incomes for most Americans haven’t gone up since the 1980′s. Now we have to learn to live within our means, meaning, spending less than we make each month.
This brings us to step one. The best thing you can do for your financial future and to get out of debt is to create a budget. Everyone groans when they hear the word “budget”, but it can be something very simple to use as a guideline, before you make it more detailed and specific. All you need to do is write down what you need to spend money on for the month, including necessities like utilities, food, shelter and clothing. In addition, add things you owe, such as mortgages or rent, car loans, credit card bills and the like. Assign every dollar of income to one of your needs or debts. When your next paycheck comes, ONLY spend that money for the items on your budget.
An easy way to help you make your payments is what’s known as the “envelope system”. You create an envelope for each expense, like groceries, gas, lunches, and so on. You then put cash from your pay into each envelope according to the budget, and then only pend that much. If you run out of money, you have to borrow from another envelope, which gives you less for that category, so you have to be careful.
A problem can arise if you don’t make enough money to pay your necessities plus your debts. In this case, you will have to find a way to renegotiate lower payments on your debt, reduce your expenses, such as fast food dinners or grocery store bills, or increase your income. You can get a part time job, start an online business to bring in more money, or sell some household items you don’t need any more. Make sure all of the extra money goes to paying down your debt.
If you follow these basic steps, your neighbors won’t hear you yelling any more, Get me out of debt! In fact, they might even start asking your advice about how they can do it too.
