Climb Out of Your Financial Hole – Take Baby Steps

A Simple Guide to Getting Out Of Debt

Many people think that getting out of debt will be a quick and simple process. They forget that (at least for the majority of consumers) it took a number of years to get into serious financial trouble. It makes sense that repairing your credit and reducing your overall debt will take time and patience.

It also will take a commitment to change. It’s true that some people have gotten into financial problems through no fault of their own- job loss, an unexpected medical emergency, or employment disability. But the majority of Americans who are currently overwhelmed with debt are in this position because they made poor financial decisions and continue to have bad money habits.

Unless you make a commitment to change these bad habits, it will be nearly impossible to turn things around financially. So before attempting to put these ideas into action, honestly assess your situation and see what positive changes you personally need to make.

Again, remember that getting out of debt can be slow-going at times. When you start with small, practical steps you will begin to see the rewards of your efforts after a short period of time. The key is to continue using your new money management skills and smart spending habits to eventually arrive at your goal- no debt!

Here are some simple ways to start climbing out of the financial hole you are in.

  1. If you don’t have a budget, make one. You will never be able to permanently reduce your debt if you don’t have a budget. This means adding up all sources of income and also totaling all of your debts. You have to have an accurate number of what you owe to begin to work on reducing it.
  2. Make your budget realistic. Gather your receipts and actually look at what you spend. If you have an entertainment budget of $200 a month and your restaurant tabs are $450, you are doomed to fail. When you go over your expenditures and realize what you are actually spending, it shows you where you can make much-needed cuts.
  3. Many people overspend (impulse shop) to feel better or to compensate for other personal issues they are experiencing. If you are one of these people, you need to be upfront about dealing with this. Impulse buying can destroy a budget and put you even deeper in debt. Until you acknowledge that you have this problem, you realistically can’t expect to get out of debt.
  4. If you’re married or have a partner, talk with them about the financial situation. For your plan to be successful, each of you has to be committed to the same goal and agree upon the methods you are going to use. You need to work together, not against each other.
  5. Start an emergency fund. Ideally, this should be at least $1000. The odds are that unplanned financial situations will arise from time to time. The important point here is that this money is for emergency situations only- not for something you happen to want. You need to get out of the habit of using credit for unforeseen events. Borrowing to deal with financial problems is a losing proposition.
  6. Avoid creating new debt. Put away the credit cards and live on a cash basis. This gives you much more control over your spending. Plus, people tend to be more thoughtful when making a purchase if they use cash. Budget yourself a certain amount each week and learn to live within that budget. When the money runs out, it runs out.
  7. Find ways to increase your income. A part time job can help. Selling items you never will use can bring in added cash. Whatever additional money you can get will only help you pay off your debt that much quicker.
  8. Learn to make do with less. We live in a culture of excess, so this can be a hard pill to swallow sometimes. But even small changes in lifestyle can have big effects when it comes to money. Cut back on the number of times you eat out. Rent movies instead of going to the cinema. Instead of buying those bestsellers, use your local library. The savings will add up.
  9. Stop trying to keep up with everyone else. This is a habit we all recognize and it can really set you on the path to financial ruin. Take control of your money and make smart decisions that enhance your financial well-being, not jeopardize it. Don’t let money control you.
  10. Learn to look for bargains. Use coupons when grocery shopping. Check to see when stores are having sales (if you absolutely must shop). Go online and find out about free concerts, art festivals, etc. that can provide great entertainment at little or no cost. Many museums offer discounted tickets on certain dates, so investigate before paying full-price admission.

Recognizing that you have a financial problem is the first step towards working your way out of it. By learning smart money management skills and making a commitment to change the bad habits that got you into financial trouble in the first place, you can be successful in eliminating your debt and living a financially sound life.