It seems that for some reason society in general is only just recently coming to realize that being in debt is like being enslaved. As long as you have debts to pay, you’re going to have to keep putting your nose to the grindstone to chip away at that. The process can seem endless, and it’s pretty bleak to think about.
The truth is though is that you can get out of debt, and you can do it relatively quickly. All it takes is a little hard work and determination, coupled with a few tricks up your sleeve. I’ll give you the keys to the kingdom here, so that you can finally be free of the burden of debt.
#1 – Know Your Credit History
Though plenty of the debt we acquire of our own volition, there is a degree of innocence in some of these debts. Things like address changes can cause bills to fall between the cracks, and we’re only human – sometimes we just miss things.
The first step in getting out of debt is getting familiar with exactly what you have. It’s an unpleasant task, I know. Grab yourself a stiff drink, and pull up your credit report. Go through every negative on the list, and start writing down all of the debts you owe. Make notes of the dates and account statuses, and asterisk any that you think may be fishy or mistakes. Which brings us to the next trick…
#2 – Dispute What Isn’t Correct
So here’s the dicey part. After you’ve gone over your credit report, mark anything that you don’t recognize or that seems suspicious. Usually the creditor will have a phone number listed next to their name. Start calling them up and verifying that these accounts are in fact still owed, and that they were in fact opened by you. Get comfy – this process can take a while.
If they aren’t, then it’s time to file a dispute to get the account removed from your credit report. You can do this directly through one of the credit reporting agencies websites. In the mean time, make sure your identity hasn’t been stolen, and tighten up security if you need to.
#3 – Set Up a Budget
Once you’ve figured out who you owe what to, it’s time to start a budget. The simplest way to start is definitely by listing all of your fixed expenses (things you know you’ll have to spend money on every month), and comparing it alongside all of your income.
There are a lot of great tools out there to help you break things down even more, and even apps and websites to help you track expenses and stay on target to meet your goals. Either way, the key here is knowledge. Just make sure you know what you have to spend, and how much you’re spending so that you can start setting goals for paying off your debts.
#4 – Find Additional Sources of Income
Once you’ve set up a budget and trimmed the fat, you can start looking into ways of building up your savings. However, staying on top of bills, making regular savings account deposits, and paying off your debts is no easy task, and often our present source of income just doesn’t have enough wiggle room to meet these goals.
Even if you’re maxed out for time, start looking at other ways to bring in a little extra money. It can be an odd job here and there, or clearing out some clutter in your house and selling it on eBay. The key here is to just start somewhere, and make it a point to increase your additional income a little bit each month.
#5 – Annihilate Interest
Interest is your worst enemy when it comes to paying off your debts. Even as you scrape together cash to pay off debts, it builds on your principle balances to make it take that much longer to get those accounts closed and paid for. Interest’s worst enemy? Big fat chunks of cash.
The faster you pay down your debts, the less interest you’ll wind up paying, and the sooner those ‘paid in full’ statements will start coming in the mail. As long as you don’t have to worry about early repayment penalties, hit those loans hard and fast, and avoid paying extra out of pocket.
#6 – Debt Consolidation
If you have a considerable number of debts to pay off with particularly high interest rates, debt consolidation loans may be something to consider. While it may seem counter productive to take out a loan to pay off a loan, when it’s multiple loans and it’s taking you years to manage all of the payments, a consolidation loan is a good way to get them all under one low interest rate and knock them out.
Of course, there are qualifying terms for these loans, so your credit can’t be so damaged that you end up with an even higher interest rate, but if you can even just get it matched or below the average rate you’re paying on your debts, it could be a way to pay things off faster, and seriously simplify your finances.
Debt is no small beast to tackle. Managing regular payments on top of day to day expenses and still managing to save for retirement can seem daunting; but if you follow these simple tips, and accepting that it’s going to take time, hard work, and maybe some frugality will get you on the road to being debt-free.