Talk to a debt counselor toll free:800-300-9550
Our Clients Rate Us Excellent
Based on 3234 reviewsTrustPilot Reviews
It's also important that while you're changing those overspending habits you are also working to eliminate your debts. Here are five steps that could help.
1. Evaluate your debts
Print out all of your credit reports and get all of your other financial statements so that you can see just where you stand. This can be scary but it’s critical. Take a piece of notepaper or a spreadsheet and put down your balances, interest rates and the monthly amounts due on each of your debts. Don't forget your personal loans, credit cards, auto loans and any other debts. Be sure to also write down the annual fees you pay on those credit cards.
2. Determine what you can pay
Once you have all this information you need to determine how much you could pay on your debts. Add up all of your monthly earnings after taxes and then subtract your mortgage payment or rent from that amount. Next, subtract your other fixed monthly expenses such as payments on student loans, utilities, groceries and insurance. This will tell you what you have left to pay on your debts.
3. Create a plan
You now know your exact financial situation. So the next step is to make a plan for eliminating those debts. The way you do this is to subtract your monthly expenses and minimum debt payments from your monthly after-tax income. Use whatever money you have left over pay off the debt that has the highest interest rate and the highest balance. Continue to do this every month until you pay off the debt. Then start working on your debt that has the next highest balance/interest rate. This is the quickest way to reduce your debts. Make sure you do not charge anything on your credit cards during this time and be sure to make at least the minimum monthly payments on all your other debts. Try to also increase how much you pay on that debt with the highest interest/balance every month.
4. Contact your lenders
Step four in reducing your debt is to contact your lenders to see if you could get better terms. For example, you might be able to lower your interest rates or even get a reduced settlement on some of your debts. Most financial experts say that it's easiest to negotiate debts that have already been charged off by the creditor or are already in collection. f you would like advice from an attorney on settling debts, watch this video ...
5. Be sure to follow through
Do your best to meet your repayment goals every month. It's not bad if the amount you put towards your target debt varies from month to month. Just try to put as much as possible consistently towards your debts. One good way to do this is to sign up for automatic payments.
Be sure to celebrate your success when you reach a major milestone. Do this and before you know it your debts will be a thing of the past.
Don’t forget to pay yourself
It's important that while you're paying off your debts and changing your spending habits that you don't forget to pay yourself by putting money into savings. You need to have an emergency savings account so that when, and not if, you run into a financial emergency you will have the money to cover it. Otherwise, you'll just be back in to debt again. If you have a tough time saving money, arrange to have automatic withdrawals from your checking account each payday with the money deposited into your savings account. The money you don't see is money that's harder to miss.