Five Steps to Eliminating Your Debt

There are hundreds of advertisers claiming they can reduce the debtor's burden by consolidating multiple debts into one loan payment. What most overlook, however, is that the trick to truly reducing your debt is not gaining any new debt, and only you can accomplish this. Knowing how to decrease the amount of debt you already have is easy, you pay it off in some form or you will be forced to file bankruptcy. Working with creditors can be difficult, but can also pay off, so begin by speaking with your creditors and letting them know you are getting serious about getting rid of your debt with them. Many times they can offer a lower interest rate or monthly minimum payment if you close your credit line or no longer use the card after a certain period of time.

Taking control of your financial situation can be a difficult and time consuming task. It will not be easy, but that should not deter you. Getting in control of your financial debts and obligations now will mean less headaches and stress over your financial situation of the future. Follow these simple tips and you will be on your way to a better financial situation in just a few short weeks.

Track Your Money
For one full month track every cent that you earn and spend, including credit card purchases and payments. To aid in making this a little easier on yourself, keeping a notebook with you to record all your purchases is suggested. At the end of the month categorize all of your expenses and add up the total for each category. Your categories will vary but some basic ones you might use are bills, groceries, personal care, pet needs, and extra expenses.

You might find that you have spent more money than you earned during the month of tracking your spending. No matter what the outcome of your month of tracking, don't beat yourself up over it. Being honest with yourself about it is the first step and what you learn about your spending habits can help stabilize your future financial decisions.

Pinch Your Pennies
Find out what expenses that you have each month that you can cut out of your budget. Going out to eat just twice a week can add up quickly, and before you realize it you have spent an entire day's wages on burgers and fries when you could have eaten at home for almost two weeks on the same amount of money. Look into getting bundled services on your internet, cable and home phone services as many companies offer large discounts for working solely with them. There are many ways to save money around the house by doing simple things like changing your light bulbs to energy efficient bulbs, setting your thermostat at a constant temperature year round, and unplugging items when not in use.

Savings on items purchased routinely can add up over time, as well. Bulk purchasing of dry goods like beans, rice and grains can save you hundreds of dollars each year. Online marketplaces and retailers will often sell large quantities of cleaning supplies and paper goods as well and the savings can add up as quickly as bulk purchased groceries. If your family will not consume all the goods before they go bad, consider going in with another family member or a neighbor on a bulk purchase.

Get Rid of the Plastic
Besides keeping one ATM or debit card with you, getting rid of all other plastics in your wallet is highly recommended. This might well be one of the most difficult tasks for many individuals. Life without a credit line anywhere can be difficult to imagine for some, but getting to that point will save you thousands of dollars each year.

If you have several cards to rid yourself of, begin with the cards that you seldom use and work your way down until you only have one or two left. Begin using cash or a debit card to pay for purchases so that any habit of swiping the plastic is done with a debit card rather than a credit card. After a few weeks of doing this get rid of any remaining cards and continue using other methods of paying for your purchases.

I would like to point out that seeing the rewards from this tip will take a bit longer than some of the other tips mentioned here. Although the rewards are not immediate, the tip is highly useful and will exponentially pay off in the future. When you stop using your credit lines, you stop adding debt to your already burdened financial situation. From that point you are then able to begin paying on your debts more efficiently. You will see the balances begin to drop, and while you may pay the same for a few months, eventually you will be paying less and less to each card.

Build a Cushion
Cutting costs is the first step to saving money. With the differences that you are saving in your everyday purchases you can begin building a savings account up. At this point you should not be concerned with high yields and interest rates on the account that you sign up for, but rather you should concentrate and put effort into pinching pennies and depositing the difference into your account. Most savings accounts only allow a set number of withdrawals and deposits per month, so making a weekly trip to the bank to deposit any saved cash is recommended in order to keep the number of transactions to a minimum.

Having money in savings, even when you still have debt, is a comforting feeling. If someone should get sick or loose a job, there will be some money there to cushion the blow. Do not fret if the savings remains the same or has little growth for several months, we start from nothing and work our way up. Every dollar that you can deposit into that account is another dollar you have saved for your future.

Set Goals
Mapping out a plan for your financial future is always a good idea. There are several types of savings accounts that are specialized for particular needs such as retirement accounts and college funds. Setting goals for your money will give you a clear idea of what you should commit yourself to doing with the cushion you have built. Making certain to leave plenty of money should the need arise, you can begin to pay off old credit card debt and student loans at a quicker pace or you could save up for a vacation, the choice is yours.

No matter what your plans for your savings account are, you should be proud of the money you have worked hard to earn and even harder to save. Whatever you choose to do should bring you happiness and a big reminder that getting your debt under control is a huge step in feeling much better about your financial outlook.