Surprise, there are no secrets to getting out of debt. All it takes are small steps, a bit of discipline, and a readiness to start managing your money. Getting started, however, is the most important part. That’s why the easiest way to manage your money and get out of debt is to take it one step at a time.
The first step is to create in writing a monthly budget (a monthly budget financial plan). Partners (those who are married or living together) need to do this together. First, write down how much money you will bring home this month (net income). Then, make a detailed list of how you spend your money (monthly expenses). Put the most important things first, rent, mortgage, car payment, and/or transportation to work (fixed expenses). Then list the bills that you must pay every month, groceries, utilities, electricity, furniture payments, credit cards and etc (flexible expenses). At the bottom put things you may be able to do with out like eating out, going to the movies, buying name brand clothes (discretionary expenses).
Be honest and realistic about each item and see where you can save money.
The second Step is to start your debt reduction by listing your monthly debt payments ( credit cards, loans, etc…)from the smallest amount to the largest amount. Pay the minimum payment on each of those bills. The minimum payment amounts can be found on your accounts paper statements or your online account summary. Next apply the money in your budget that is left over to the smallest bill until it is paid off. Now apply the extra money you were paying on the first bill to the next smallest bill. When that one is paid off move on to next smallest bill and keep on going until you have them all paid off.
You have created an avalanche or a snow ball rolling down hill.
Each time the amount you are able to pay towards each of your debts is getting larger and larger. After you become debt free, if you can, do your best to pay cash for everything new you buy. If that is not possible, then the next best option is to pay the total amount you charge on your credit card bills every month. Please keep in mind that as you work towards paying off your debt, that you continue to make monthly contributions to your savings account. Maintaining a savings plan is crucial to your new getting out of debt lifestyle.
Dr. Gaylon Greer