How to Get Out of Debt and Stay Out!

Credit card bills getting out of control? Wondering if you're ever going to be debt free? Tired of all the scams and costly "plans" out there for getting out of debt fast? Don't pay someone to tell you what you can already figure out for yourself! Use these quick tips to set yourself on the road to a debt free life.

First, you need to take an honest look at your financial picture. Use your most recent paystub(s) to calculate your yearly after tax income. (Multiply your total after tax pay by the number of pay periods each year (52 for weekly, 26 for bi-weekly, and 12 for monthly). Write that number in large print at the top of a piece of paper, and then divide that by 12 (to figure out your monthly income) and put that next to it. (For example, you might make $35,984 after taxes, which is $2988/month.)

Next, gather all your "necessary" bills - rent or mortgage, electricity, gas or oil, water/sewer, telephone, cable, insurance, daycare, gas for your car, retirement plan, etc. Make a list of all the bills, figure out what you pay for each on average every month and write the amounts down on an expense list, and then set that expense list aside.

Now figure out about how much you spend on groceries each month and add that to your expenses list.

Now comes the tough stuff - the honesty. Gather up all your credit card bills. Every last one of them. On a new sheet of paper, list every credit card, the balance on the card (even if it's zero), and the interest rate. Total it all up, and take a deep breath. That's how much you need to pay off. But how?

The answer is actually much easier than you think. First, total all your monthly expenses (excluding credit card payments). Compare that amount to your monthly income. If the numbers are very close to one another (say within $400), you are going to have to take a good long look at your expenses. What on that list can you reasonably cut? And, I'm not talking about forever here - just cut back for a year or so. Can you live with a less expensive cable package? Fewer cell phone minutes? Can you set the thermostat a few degrees cooler in the winter? Can you leave the AC off more in the summer?

Anywhere you can squeeze a few extra dollars out of your budget, at least for the next year or two, will help you pay off your debt faster. If you're young, you might consider cutting back on your contribution to a retirement plan for a while, especially if you're carrying balances on high interest cards. I don't know any retirement plan that can guarantee a 15% return on your investment, so if you're paying that in interest on a credit card bill, while saving in a retirement account, you'd be well advised to focus on paying off your debt now, and save for retirement when you're back to a zero balance.

Once you've figured out where, if anywhere, you can cut back on your regular expenses, give some thought to your credit card usage. How many times a month are you going out to dinner and charging it? Are you buying your lunch at work every day? Be realistic about what you can actually afford to spend - set yourself a limit. Perhaps you can pack a lunch for work 3 or 4 days a week, instead of eating out every day. You can limit your takeout meals to twice per month. Budget in a few "special" occasion meals, and then really stick to that budget. If you try to cut everything out at once, you'll "cheat" and your budget will fail, so be realistic. Only cut where you know you can reasonably stick to the plan.

Now it's time to look at what you already owe. Focus your efforts on the cards with the highest interest rates, regardless of the balance. Number the cards in the order in which you will pay them off. Once you've paid the balance in full, consider putting the card away, or canceling it all together. One other tip - if you have a rewards card, you should consider using that for your daily spending, and plan to pay it off EVERY month. Ask the credit card company to reduce your credit limit to an amount you can pay off easily, and put your gas, groceries, etc., on that card. If you pay of the balance each month you won't pay any interest, but you'll get whatever rewards the card is offering. Not a bad deal!

In all likelihood, it will take you about a year, or perhaps even more, to get out of debt. But if you commit to your budget, and follow through every month, you'll see a slow and steady decrease in what you owe. Once you're finally debt free, don't use that as an excuse to go out and buy that big screen TV you've been dreaming of. Instead, sock the money you were paying to credit cards into a savings account, and when you've saved enough, march into that appliance store, cash in hand. You won't believe how good it feels!!!