To learn how to get out of debt you need to understand a few things. You have to know how much your debt is costing you. You have to know your debt management options. You have to know your income and expenses. You have to know what you can afford to pay towards your credit card debts, medical bills, student loans, and IRS tax debts each month to hopefully one day become debt free.
Getting out of debt is not easy. Some debt management plans are quicker than others but neither is totally painless. Sorry there is no quick fix solution that will wipe out your debts in a matter of days. Any company promising such fast debt relief is a scam and should be avoided.
As you can see on most of the other personal finance bloggers out there getting out of debt starts with spending less than you earn. If your expenses exceed your income and you have to pull out your credit card to charge groceries at the end of the month you will not be paying off your debts anytime soon.
You can start looking at your income and expenses with these links to free budget worksheets. Knowing how much you are spending each month is the first step. Stop spending so much money on the latest iPhone, iPad, iPod, or Android smartphones. You can work on paying off your debts first and then get the latest iPhone 6 or iPad 4 when they come out in a couple years.
Once you have your personal budget printed out it’s time to start cutting expenses and working on increasing your income.
Let’s talk about cutting expenses first. When was the last time you shopped for car insurance? Home insurance? You see all those funny TV commercials because they want your business. You can get quotes online and possibly save $50 to $100 bucks each month with a new company.
How about trimming down the cable bill and using Netflix or other streaming video service more?
We also talked about DIY auto repairs to save money.
Can you hold off on buying a new car or truck for a year or two? How about getting a certified preowned and saving several thousand dollars compared to buying new? You’ll have a much lower monthly payment which you can use towards paying off your credit card bills, medical bills, student loans and IRS tax debts.
There are many ways you can look at trimming expenses. You can sacrifice for a short while to get your finances in order and then once you have wiped out your debts you can live a little. Just like what Dave Ramsey teaches.
Now let’s talk about increasing your income to get out of debt.
If you cannot get more hours at your current job then it’s time to start working a second job or doing freelance work.
Just because the unemployment rate is around 8% does not mean there are not job opportunities out there.
As a part time employee or freelancer you would cost a potential employer less than if they hired you full time. They would not have to provide you with benefits. You can get a $8 to $10 an hour job working 20 hours a week during your evenings or weekends and that’s an extra $200 a week or $800 a month to pay off your debts.
That’s about $10,000 per year working only 20 extra hours a week. Would you be willing to work an extra 20 hours a week to pay down $10,000 more in credit card debt this year?
That’s the secret to getting out of debt – spending less than you earn. Trim your expenses, increase your income and in a few short years you could be completely debt free. Now you know how to get out of debt.