Following debt relief steps will help you climb out from under. But reducing what you owe isn’t always a simple process. Use these 15 Steps to managing your money to get out of debt.
While it takes years to get into financial problems, many people feel getting out should be instant. It isn’t, it’s a step-by-step process you need to follow, and understand, so that you don’t repeat the same mistakes again, or make new ones!
Step 1: Review and understand where your spending went wrong and where the excess spending is. Take steps now to reduce spending in those areas, even if it means avoiding certain situations that trigger over spending.
Step 2: If you don’t have a living budget in your Money Management Plan, create a budget now or you won’t stand a chance for permanent debt relief.
Step 3: If you over spent because it made you feel better, or because of other personal issues, now is the time to deal with those issues once and for all. If you need help, counseling can be of tremendous benefit to get to the root of over spending problems so you can enjoy permanent debt relief.
Step 4: If you are married, or have a significant other, talk to them! Open communication about finances is essential to maintaining your money management plan for debt relief, and reaching your financial goals together, not to mention the longevity of your marriage or partnership.
Step 5: Use recommended Budgeting Guidelines to get your finances back on track. If one section exceeds the recommended percentage, you need to cut back there, or, modify the percentages to fit your budget. In either event, the total percentage cannot exceed 100%.
Step 6: If you are “keeping up with the Jones’s,” STOP! The Jones’s will be glad you did, and so will you! You might even want to give them the url of this site, after all, maybe they were trying to keep up with you and need debt relief too?
Step 7: If your budget allows, pay extra on high interest-bearing accounts such as credit cards. Only increase the payment on one account at a time until it is paid off. Remember, you need to see the debt reducing. Larger payments on one account will show this better than extra payments on several accounts at the same time.
Step 8: If you get a tax refund, bonus, or other intermittent income, use this money for immediate debt relief, after you have a cushion set aside for emergencies.
Step 9: Whether debt reduction, or meeting goals, you need to keep track of all income and expenses. Update your budget regularly. You should keep on top of spending, and your budgeting, to make sure you don’t fall into old habits again.
Step 10: Stop using credit cards. This is very important to your financial future. Until you are back on solid financial ground, you need to bite the bullet and quit spending. Especially spending with high interest-bearing credit cards!
Step 11: Come up with ways to increase your income: a second job, selling unused items, etc. Get the family involved in ways to reduce spending and/or increase income. Work together to meet your goals for debt reduction and financial security.
Step 12: Use the Debt Settlement and Debt Collection sections of our site to see if you can obtain any savings on payment of your debts.
Step 13: Take advantage of online resources to save money on your spending including groceries, utilities, shopping, travel and more.
Step 14: As you pay off department store charge accounts, write a letter to the creditor to close the account. These cards are notorious for higher interest rates. Also request they report to the credit bureaus that the account was closed at your request. Send a copy to each of the credit bureaus for them to include in your credit file. This shows good repayment history, and responsible debt management.
Step 15: Never give up on learning sound money management practices. Make them the good habit that replaces your bad debt habits. You won’t be sorry!
When Your Budget Doesn’t Cut It
Ok, let’s assume you have done everything you can to reduce spending and increase income, and are maintaining a household budget. But you find that your expenses still exceed your income each month, and you are just going further and further into the hole. It’s time to take further action to get out of debt, so you can reduce the stress, and get back on solid financial ground.
If you find that you can’t keep your budget on your own, you may need credit counseling in order to get out of debt:
Our Recommended Home Budget Helpers:
Free household budget form you can work with online. It also calculates your budget ratios.
If you love spreadsheets, you will love the budget spreadsheets offered by Vertex 42. Some are even free and all of them are easy to download!