We live in a culture where more is better, and spending beyond our means is encouraged. Because of this, the average American household has an average of $15,611 in credit card debt, over $150,000 in mortgage debt, and $32,000 in student loans. These numbers are alarming, and are a reality for many people. There’s nothing worse than feeling suffocated by debt, but the situation is not hopeless. Though it takes dedication and sacrifice, these few simple steps can help you save money, and work your way out of debt.
Stop Borrowing Money
This one may be obvious, but don’t take on any more loans, and don’t borrow money to pay off your loans. If you truly want to get out of debt, you need to stop spending, and concentrate on shrinking down what you have.
Know Your Number & Organize Debt
Pull out all of your loan paperwork, or access it online. Even if it’s cringe worthy, add up your total debt to know exactly what you’re working with. Organize your loans with the ones accruing the most interest as a priority and the ones with the lowest interest being paid off last. You’ll want to avoid extra interest charges by tackling the high interest ones first.
Sit down, and really look at the expenses of your family. Be realistic with your expenditures, but realize that you are also going to need to cut back on luxuries in order to tackle your debt. Make sure to look at things like past credit card statements, utility bills, and car payments to accurately set your budget. If your numbers just aren’t adding up, consider taking on extra work. Nobody said getting out of debt was easy, and working after hours just might be what it takes. Cut out things like eating out and going on expensive outings to movies and concerts. Instead of shopping at expensive department stores, consider more budget friendly stores like Sears where you can get more for your money.
Start an Emergency Fund
Oftentimes, when families encounter a crisis, they borrow money to stay afloat. By stocking a small emergency fund, usually about $1000, the money will be available for those unexpected situations.
Though it’s tempting to spend your tax return on a family vacation, that money should be used to pay off debt. If fully committed to the cause, any extra money should be used to pay down loans. Use your tax return, birthday money, and rebates to get one step closer towards your goal.
Getting out of debt is possible if you’re willing to work hard, make sacrifices, and stay committed. Follow these steps, and you’ll experience the financial freedom you’ve always dreamed of.