How to Get Out of Debt Part I
Many times, when people are looking for ways to reduce their debt, they go looking to find someone else to help them with their problems. The truth of the matter is that every person is capable of figuring their way out of debt if they have a job and are bringing in some kind of money. Below are some tips to employ to help you gradually, or quickly, work your way out of debt.
1. Write down all your debts. This is always the first step, because, as Dr. Phil might say, you can’t address what you won’t acknowledge. Take one month’s worth of bills and write down what each is, as well as what the amount is that you’re expected to pay. As it pertains to credit cards, also write down the annual percentage rate. Also, write down how much you estimate you spend on things such as food, gas, entertainment, etc.
2. Calculate your monthly net income. Net income means how much you actually bring home, or have deposited into the bank. Hopefully, it’s the same amount every pay period; if not, then it’s going to be a total estimate. There’s a few ways of doing this. One, if it’s the same amount, multiply that by either 52 if you get paid weekly, 26 if you get paid bi-weekly, or 12 if you get paid monthly.
After you’ve done the first two things, see what the difference is between what you’re bringing home and what your monthly bills come to is. Hopefully, you’re on the positive side as far as income goes. If you’re close either way, there’s still hope. If you’re in the ditch, and your expenses outweigh your income, you’re in trouble, but there’s still hope for you.
3. Take a look at the bills you’re paying to see what may be there that you either don’t really need, or can reduce. For instance, if you have cable and have all the premium channels, you could probably get rid of some of those to reduce your bill. Maybe with your cell phone you can eliminate the internet for awhile, or reduce your text message plan somewhat. These are luxuries, not necessities, and you might miss them, but your wallet will thank you. Most people will find that if they really take a good look at things like this, they can save anywhere from $100 to $300 a month, depending on how much they were spoiling themselves.
4. Take a better look at expenses that aren’t monthly bills. You’re probably not going to be able to reduce your gas consumption because you’re not really going to save all that much money taking the bus to work unless you drive long distances, in which case taking the bus might make a lot of sense. However, reducing your entertainment budget might be a big deal, especially if you’re eating out twice a week, or every day for lunch. It’s almost better to increase your food bill a little bit to get things so you can take a lunch with you, and maybe eat out once every two weeks, at a less expensive restaurant, instead of weekly. If you’re really in trouble, extra spending to make yourself feel better will only hurt you.
See more:
How to Get Out of Debt Part II
How to Get Out of Debt Part III