How to get out of debt
Getting out of debt requires three things:
1. The acknowledgement that you are in trouble with your finances.
This is the most important element. People get into debt because they don't ahve a realistic grip of their situation. They either imagine that they are wealthier than they really are (and all the purchases on credit card help fuel this fantasy), or they know they have lost control of their finances but believe that this is just short-term and they will get out of debt as soon as they get a new job/pay-rise/inherit from Aunty Jill.
Only when you acknowledege you are in trouble and have to actively do something about it, will you climb out of debt.
2. The willingness to change your life and make sacrifices in the present to clear the debts
3. The willingness to be creative both in cutting back on spending and in increasing income.
1. The acknowledgement that you are in trouble with your finances.
This is the most important element. People get into debt because they don't ahve a realistic grip of their situation. They either imagine that they are wealthier than they really are (and all the purchases on credit card help fuel this fantasy), or they know they have lost control of their finances but believe that this is just short-term and they will get out of debt as soon as they get a new job/pay-rise/inherit from Aunty Jill.
Only when you acknowledege you are in trouble and have to actively do something about it, will you climb out of debt.
2. The willingness to change your life and make sacrifices in the present to clear the debts
3. The willingness to be creative both in cutting back on spending and in increasing income.
The plan of action
In order to become debt free you need a plan of action.
Everyone is slightly different in how they approach things. Some people like to have an all-out blitz on debt, doing everything they can to cut expenditure and increase income. If you are a blitzer, make a giant list of things to do to cut expenditure and increase income - switching your electrity to cheaper providers, making sandwiches for work, cutting back on grocery bills, selling things on Ebay or in yard sales etc - be as creative as possible - and then get stuck in and do it. The more you manage to do while you are on a high of being motivated by your plan, the better.
With other people, this approach overwhelms them and they give up because it seems too much - if you belong to this group, you need to go into this slowly. Pick one thing that you can do with not much effort - say stopping the habit of buying a Starbucks coffee each day, and concentrate on that for two weeks. Once you feel you've changed your habit there, then tackle the next thing, say switching to a cheaper supermarket for your monthly shop.
The important thing is to keep going. Both groups will reach a plateau of despair where they feel that despite their efforts, they are getting no-where. You just have to keep going in spite of everything, and small victories along the way can really help.
One way to keep motivated is to start a blog about your efforts to clear your debts, and post in the sidebar the amount of debt you started with, and then keep a running total about the amount of debt you have outstanding. It is very motivating to have it publicly posted like that, and even more encouraging when you see the amount outstanding fall. There is a large community of debt bloggers who motivate each other to get out of debt, and being part of this community can really help with keeping spirits up and with ideas on how to cut expenditure.
Everyone is slightly different in how they approach things. Some people like to have an all-out blitz on debt, doing everything they can to cut expenditure and increase income. If you are a blitzer, make a giant list of things to do to cut expenditure and increase income - switching your electrity to cheaper providers, making sandwiches for work, cutting back on grocery bills, selling things on Ebay or in yard sales etc - be as creative as possible - and then get stuck in and do it. The more you manage to do while you are on a high of being motivated by your plan, the better.
With other people, this approach overwhelms them and they give up because it seems too much - if you belong to this group, you need to go into this slowly. Pick one thing that you can do with not much effort - say stopping the habit of buying a Starbucks coffee each day, and concentrate on that for two weeks. Once you feel you've changed your habit there, then tackle the next thing, say switching to a cheaper supermarket for your monthly shop.
The important thing is to keep going. Both groups will reach a plateau of despair where they feel that despite their efforts, they are getting no-where. You just have to keep going in spite of everything, and small victories along the way can really help.
One way to keep motivated is to start a blog about your efforts to clear your debts, and post in the sidebar the amount of debt you started with, and then keep a running total about the amount of debt you have outstanding. It is very motivating to have it publicly posted like that, and even more encouraging when you see the amount outstanding fall. There is a large community of debt bloggers who motivate each other to get out of debt, and being part of this community can really help with keeping spirits up and with ideas on how to cut expenditure.
Settling your debts
If you can raise sufficient money from doing overtime or from sales on Ebay, you may be in a position to settle your credit card debt. The more you can pay off as a lump sum, the more you save in interest payments. If you are in arrears with your debts, you might be able to negotiate with the lender to settle for less than the face value of the debt.
