Becoming Debt Free and Staying Debt Free: Proven Tips & Tactics

It is so easy for people to fall into debt in the existing economy. It has become so simple to obtain credit by all the credit cards and bank loan offers. Unfortunately, it is only getting more difficult to pay back those debts. Regrettably many people realize too late the hazards of getting into debt. A few charges to our credit cards, a Home Equity loan, an auto or truck loan, maybe a consolidation loan-debt has a way of creeping up on us. Every one of those items adds up quickly. One of the dangers of being in debt is the stress of having way too much debt and not enough income. You are not enjoying life if you are drifting about in an artificial life raft, floating on a virtual ocean of debt. The panic, fear and arguments related to money issues can also affect your personal happiness. Another danger is if something unexpected comes up like an emergency or your vehicle breaks down, you have no where to get any money because all of your credit cards are maxed out. And then there is the phone constantly ringing off the hook by debt collectors trying to get money. A considerable number of Americans are extremely in debt, living beyond their means, spending more than they are earning and struggling every month to pay their bills. My husband and I was a couple of those types of people. We decided to jump off the debt freeway and on to the less traveled road. Here are some tips for getting debt free.

1. Get organized! You need to recognize exactly where you stand before you can start undertaking your debt. Collect all our account statements and your bills. Create a list of every debt, the current balance and the current interest rate. Then categorize them in the order that you want to pay them off. I found that paying off the debt with the highest interest rate first works fine however, many experts suggest that it is smarter to start with the lowest balance because it will get paid off quickly and it provides motivation. Either way is fine, just start!

2. Pay at least $10 over your minimum on your credit card bills. This will allow you to pay off the debt much quicker and less interest accumulates. You could save $1,000s on interest charges. You should also pay more than the minimum each month on your mortgage, car loan and any other type of loan. I pay just about all my bills online. This reduces my cost of stamps and checks every month and also gas if you like to pay bills in person.

3. Negotiate! Call all your credit card companies and tell them about all the offers you are getting in the mail for 0% interest for 6 months. Would they be able to offer you a much lower rate since you have been with them for a long time? It doesn't hurt to ask and you will be surprised how many will offer you lower interest rates rather than have you move your balance to another company. Also, if you are paying late or not at all, call your creditors so they can work with you. The worst thing you can do is stop communication with your creditor.

4. Refinance your mortgage for a lower interest rate.

5. Stay away from home equity loans. The only way to deal with a home equity loan is to pay it or lose the house. It is not worth the risk. Avoid using secured loans to consolidate if at all possible. This will put your property at risk.

6. Stay away from payday lenders. They make the loans seem easy to get but charge outlandish interest rates that make it hard to pay off. They will make you keep coming back for more and you will never be debt free.

7. Discontinue using credit cards to make it to your next payday or just cut them up. It is a known fact that people spend up to 30% more if they are using a credit card to buy it than if they used cash.

8. Stop borrowing money-No matter what! To spell it out: No more cash advances, no more credit cards, no more vehicle loans, no more home equity loans. If you do not have enough money in your hand to buy something, don't buy it because you can not afford it!

9. Create a budget and stick to it and stop spending!

10. Explore debt consolidation loans. Only do this if you have a high number of diverse debts in high interest rates and could get a much lower rate for all your debt. Be very careful with debt consolidation loans! Studies have shown that at least 70% of people who consolidate their debt end up running up more debts once their loans are paid off. You have to change your philosophy and your way of living.

11. As a very, very last resort, claim bankruptcy. Bankruptcy is not something I recommend any more than I would recommend divorce. Bankruptcy is a large event that can change your life forever. Be sure and research carefully and fully before claiming bankruptcy.

12. Research credit counseling. An effective way to become debt free is talking to a credit counselor. They can offer resolutions that can help you pay off your credit cards with minimum payments. Call them with any questions you might have.

The decision to be debt free is one thing but obtaining the money to do it is another story. You must decrease your expenses and increase your income. Here are a few tips to generate some extra money, save some money, and stay debt free.

1. Find ways to make extra money. Take on a second job, start your own online business, sell things that you do not need or use anymore, work overtime, have a yard sale, use EBay for selling items.

2. Grocery Shopping: Your grocery budget is the most bendable expense and can be significantly reduced to help you live within your resources. Minimize the use of convenience foods and don't use prepared mixes. There are so many of us that are so used to convenience foods and prepared mixes that we forget that we could probably make it ourselves for a lot less. Planning menus is a great way to reduce the food budget and only involves a little time. I always grocery shop with a list and only buy the items on my list. Don't shop while you are hungry. Start a garden. If you don't have a yard, grow peas, tomatoes, herbs and beans in pots. The veggies you grow are not expensive and usually taste better too. Use coupons. Buy generic (store brand) instead of name brand products.

3. Avoid eating out. Cook your own meals and make dining out a special occasion. There are so many people that eat out one, two, or even three times a week. Take your lunch to work with you instead of eating at fast food. Besides the expense, it is also bad for your waist line.

4. Start small. Cut back on that fancy cup of coffee, magazine from the newsstand, big gulps. Reuse those margarine, cottage cheese bowls, etc. to put leftover food in. Turn off all lights when no one is in the room. Change all your light bulbs to the new compact fluorescent lights (C.F.L.) bulbs to save money on your power bill. Buy your gasoline at the least expensive gas station. Dump all your change you have at the end of the day in a jar and add a dollar to it. Add up all these little savings each month and send an extra payment to the bill company that you decided to pay off first. In little time, you will have the balance cut down to zero!

5. Change your habits. Don't browse pointlessly in stores. You will be tempted to buy something. Don't buy additional cosmetic, toiletry products and extra hair products when you tons at home. Rent movies instead of buying them. Cancel your movie subscriptions such as Netflix and Blockbuster. Shop at upscale thrift stores, auctions and yard sales in good neighborhoods instead of buying new items. You won't believe the bargains that you will come across. Have a game night with friends or family. Be imaginative on how to entertain your family and yourself. Visit friends and you won't be spending a dime. Use the library instead of buying books.

6. Use bonuses wisely. Make the most of windfalls like financial birthday gifts or holiday gifts, insurance settlements, tax refunds, bonuses, rebates and a raise from work by applying these to your debt. Stay away from the enticement to gorge this extra money and apply all of it to reducing debt. Okay, maybe keep a small amount out for a treat, if you must.

7. Reduce your utility costs. Cut your cable television cost by cancelling premium channels, cancel pay per views and movies on demand, decrease subscription to basic service or cancel it entirely. Lower your phone bill by using your cell phone as your central phone. Look into free long distance or ask for a promotional rate. For your cell phone, make sure to get the right plan for the amount of time you talk. Turn off needless features even if you have to talk or text less. Stay with the pre-installed ring tones. Don't pay to download new ones.

8. You will still need dental work, vet care and grooming, hair cuts, therapy and other services that you can't avoid. If you have been with someone for years, tell them the situation you are in and ask if they will work with you. A lot of them will lower their rates or give you a discount.

9. At your work, ask for a promotion. It's hard to believe but it's estimated that half of the people who ask this get one or a raise in salary.

10. Do you have a spare room at your house? Think about renting it our for a short time.

11. Check to make sure you are getting right amount of tax taken out of your paycheck. Look into changing your deduction for awhile to acquire more money in your paycheck.

12. Take care and use your vehicle wisely. To optimize your gas mileage, get your vehicle serviced on a regular basis. Avoid needless driving and do all your errands in one single trip. Carpool with your coworkers if possible. Trade in your SUV or gas guzzler for an inexpensive, gas friendly vehicle.

13. Out of your take home pay, put 10% toward debt repayment. When your debts are paid in full that money should go directly into savings.

14. Start a savings account. Put into it as much as you can. Every little bit helps. You never know when an emergency can happen that can run you into debt again.

Another reason to become debt free is that it has become common practice for employers to check the credit history of prospective employees. It would be very upsetting if you were to be turned down for a job you were qualified for but didn't get the job because of poor credit. Prospective tenants are also having their credit records checked. They probably won't rent to anyone with an imperfect credit record.

In order to be debt free and stay debt free you must make paying your debts the number one item in your life. Prioritize your money and be willing to make sacrifices. Before you buy anything, ask yourself this question: Can I live without it? You would be astonished if you added up all the unnecessary items you buy each month. Only spend money for the things you have to have to live. Apply every extra cent you can afford toward your bills and in no time you will be debt free.