You Can Become Debt Free

According to the 2009 Federal Reserve Chairman, Ben Bernanke, the United States' economy is in recovery from the recession over the last several years; however, most Americans continue to struggle financially. Reducing and retiring debt in a financial down-turned economy, or at any time, is prudent. Consider these options to get yourself out of debt and get on the road to financial freedom.

Budget
Getting out of debt requires careful thought and planning. Check the myriad budgeting and financial tools available on Dave Ramsey's website, DaveRamsey.com. Ramsey is a nationally syndicated radio show host who teaches consumers how to have sound personal finances and successfully retire debt. List your income sources for your new budget. You may need to get a part-time job dedicated to making extra credit card payments. Record each of your expenses so you know exactly where your money is going.

Savings
Always incorporate an aggressive savings plan into your budget that includes a separate emergency fund. Most credit card debt occurs as a result of unplanned expenses, or emergencies like medical expenses or car repairs. Your emergency fund can cover these expenses without you charging up your credit cards.

Debt Snowball
Dave Ramsey specializes in teaching consumers how to reduce debt quickly with his debt snowball plan. Start with your smallest debt and pay it off first. Then, use the money you paid on that smallest debt to pay the next largest debt, and do likewise with each debt thereafter. Have a chart of your debts and cross them off as they are paid in full. This will build momentum, and before you know it, being debt free could become a reality.

Small Changes
Making small changes in your spending habits can add up big. Look for ways you can cut back on extra expenses. Consider canceling your cell phone, staying in to eat, not purchasing luxury items, or minimizing spur-of-the-moment shopping sprees at the mall. Make a commitment to freeze all non-essential spending and only take cash with you to the store.

Tips
Always pay extra on your credit cards--it takes more than just the minimum payment to reduce your debt since the payments are usually comprised more of interest than principal.

Warnings
You might be tempted to consolidate your debt. It's risky and usually ineffective because you are simply borrowing more, instead of reducing your debt. Never consider a home equity debt consolidation loan, because if you default, you could lose your home.

Sources
MSNBC.com: Bernanke: Too soon to tell if recovery will last
http://www.msnbc.msn.com/id/34313936/ns/business-eye_on_the_economy/

FTC.gov: Facts for Consumers - Knee Deep in Debt
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre19.shtm

DaveRamsey.com: Debt Snowball Plan
http://www.daveramsey.com/article/get-out-of-debt-with-the-debt-snowball-plan/

DaveRamsey.com: The Truth About Budgeting
http://www.daveramsey.com/article/the-truth-about-budgeting/