How to Get Out of Debt Part III

Here is the finale on our series, Part III, of getting yourself out of debt. If you haven’t read the first two parts, click here to view How to Get Out of Debt Part I, How to Get Out of Debt Part II.

6. Time to make some phone calls. I’m not going to recommend that everyone cut up all of their credit cards unless they’re in serious trouble. If you’ve been keeping current on all of your payments while getting deeper into debt, you at least have a chance to help yourself out. Call all of your big credit card companies (Visa, Mastercard, Discover) and ask for a rate reduction. If you’ve kept up on payments, most of them will offer you a reduction, which can save you a lot of money in fees, and in some ways immediately reduce your payment amount.

Next, if you need a quick infusion of cash and have a car payment, call them and ask if you can delay payment for one month. Most auto loan companies will give owners upwards of 10 times during the life of a loan where they can delay payment a month, though you will pay a very small fee and your loan will be extended a month for each delay. Still, it’s a nice way to get a one month jump on some funds that might help you get over, or caught up, on some delinquencies.

7. Get a part time job. Yes, I know this one everyone hates. The thing is that there’s only so much one can hope to save while trying to cut expenses, and a nice part time job might add at least $200 to your cash flow during the month, often much more. Of course if you work a full time job with lots of overtime this might be hard to do, but for most people, that’s not a concern.

Here’s the thing. There are different kinds of part time jobs. If you can write, you might be able to find some freelance writing work that could earn you some nice pay and you won’t even have to leave the house. Maybe you can find something that fits a particular skill you have. In Loral Langemeyer’s book The Millionaire Maker, she often makes that a part of her recommendations for clients who work with her, and many of them have found that it turns into a better career than the one they’d been doing, makes more money, and they enjoy it more.

Following these tips will get you out of debt, though it’s not an easy process and could take awhile. However, alleviating the worries of whether or not you will ever be able to overcome your debt will be a big benefit to you once you see what you’re up against, and you’ll love the feeling of independence that you’ll end up giving yourself.

See more:
10 Steps to Overcoming Credit Card Debt

How to Negotiate A Credit Card Settlement

How do you plan to get ahead? Ways to Increase Your Income

How to Get Out of Debt Part II

Continuing with our miniseries on getting yourself out of debt, we tackle the concept of payment plans. Click here to read How to Get Out of Debt Part I.

5. Set up a payment plan; yes, the dreaded “budget” word. Luckily, you’re already partially there because you’ve listed all your debts. If you have one and know how to use it, list everything in a spreadsheet program because this will make it easy to track, or at least set everything up. Here’s what you want to do.

First, figure out which bills are due when. Base it off either your one week or two week payment schedule; if you get paid once a month, you can skip this part. Set up a schedule where you know when you’ll pay which bills for at least six months.

You’re probably wondering why. Earlier we figured out what your net income was for 26 weeks. However, most people budget for twice a month payments, which means you actually get two extra weeks of payments a year. So, what you’ll find is that, if you extend your budget for six months, you’ll gain a pay period, and thus earn yourself a little benefit and boost which you’d have never known about if you hadn’t budgeted.

Something else you’ll do with your payment plan concerns your credit card payments. There are three schools of thought on this one. The first says to tackle the card with the highest interest rate first. The second says to go after the cards with the highest balances first. The third says to go after the cards with the lowest balances first. Let’s take a look at each of these.

The cards with the highest interest rates add more to your balances on average than other cards. Going after these balances saves money because it saves on the amount of interest you’re getting charged for.

The cards with the highest balances are the ones that make you feel beaten up and overwhelmed. If you go after these balances first, as you see them coming down your stress level will decrease.

My favorite, however, is going after cards with low balances first. The principle behind this is that everyone works best when they can see successes. The quicker you can pay off a balance, the better you’ll feel, and you’ll be ready to tackle the next card.

Of course, the idea behind all three of these ideas is that, whichever one you select, you pay more than the minimum balance, at least 50% more if you can afford it, and stop using all of your cards except possibly one; we’ll come back to that concept. Then, when you pay off the low balance card, you take that payment and apply it to the next lowest card, and so forth.

The thing is, if you have a low balance with a high interest rate, this is a win-win. If your highest balance is also your highest interest rate, you’re heading towards trouble quicker, and you just might have to go after that one first, bringing the balance down to a safer level before going after one of your other cards.

Why do I recommend you keep one card going? The reality is that if you can use one of your credit cards for small purchases, what you’ll have to pay the next month is relatively low compared to having to pay cash for everything. You don’t use it for everything in a month, just a couple of things. If you put gas in your car weekly, maybe throw one of those weeks onto your credit card. Maybe one week in the month use your credit card for the purchases. This is extreme, but if you have the space on the card it might help for a quick fix, though we’re weaning you away from credit cards eventually.

See more:
How to Get Out of Debt Part III

75 Painless Ways to Save Money

8 Simple Ways to Save Money

7 Days of Money Saving Tips

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

Dr. Phil’s Tips to Eliminate Debt

The 12-step Get Out of Debt Program