Get Out of Debt, Step by Step

If you're one of the millions of people plagued by debt and struggling just to keep up with your credit card payments and keep your bills paid, you can change your situation. You can get out of debt. It will take time and determination, but if you follow these steps, you will become debt-free.

1. Cancel your credit cards. Call your creditors and tell them that you want to cancel your account. You will continue to get statements and be liable for the existing balance, of course, but you will no longer be able to use the cards to incur new debt. If you have a card with available credit, and you feel you need it for emergencies, freeze it inside a block of ice in the back of your freezer so you cannot use it impulsively.

2. Track your spending. This may be the most important thing you can do to change your spending habits. Write down every penny you spend, on anything. Carry a small notebook or a piece of paper in your wallet, and write down any money that leaves your hand, and what you spent it on. The simple act of recording your spending will help you become more aware of how you spend money. And this will help you change your spending habits.

3. Cut back on personal spending for a time to pay off debts. You will need to both live within your means, and find money to pay off your debts. Aim for not only not debting, but having at least $25 per month to pay on your debt. Write this into your personal budget and find a way to do it.

4. Pay more than the minimum on one account, while paying minimum on others. Make the minimum payment on all accounts except the account with the lowest balance. Pay as much extra on that account as possible.

5. When one debt is paid off, pay that entire amount on another debt. Once you've paid off your lowest balance, take everything you were paying on it -- the minimum payment as well as the extra payment -- and apply it to another account.

6. Pay off higher interest debts first, except -- start by paying off lowest balance for morale. Many people suggest starting with the account with the highest interest rate, but by starting with the lowest balance, you can see real results very quickly. You can then start paying off your higher-interest accounts. As you pay off the accounts with high interest, your overall debt will increase less quickly, and you can make progress in paying them off.

7. Avoid incurring any new debt. This is very important. While you are working to get out of debt, you absolutely must not take on any new debt. This may be difficult in some cases, but if you are currently having debt problems, another loan is not going to help. You need to find a way to get out of the debt.

8. Start a savings account for a car or other major expenses. As soon as you can, start putting a few dollars a month away to save for major expenses. Increase this as often as you can. This account will be there when you do have a major expense, so you don't have to go into debt again.

Getting out of debt takes time and effort, but becoming free of your debt and having a good financial picture is one of the best things you can do for yourself and your family.

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