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How You Can Get Out of Debt Starting Now

Many people struggle with debt, and it is not just because they have not managed their money effectively. People fall into debt because of job loss, medical issues or divorce. Whatever the reason, it is possible to climb back out of debt. For some people whose debts are truly overwhelming, that might mean filing for bankruptcy, however, most people can pay off debt and live a life free of financial worry. Debt can be scary and stressful, but you don’t have to be a financial expert to find your way out of it. With diligence and organization, you can pay them off and be worry-free.

Take a Look at the Big Picture

What kind of debts do you owe and which ones are most urgent? Figure out exactly how much you owe on each one, down to the penny, and then arrange them in order of importance. For example, keeping up house payments and paying off child support debts may need to come before paying the doctor’s bill and the credit card company. Before you can figure out how to pay off your debts, you need to know where your money is going. You may need to track your spending for a few weeks before you can make a budget. There are plenty of books and websites that can give you tips on how to make a budget, not to mention common pitfalls to watch out for.

Focus on Making More & Spending Less

Once you know how much you are spending and exactly how much you owe and to whom, it’s time to put a plan in action. Basically, in order to pay off your debts, you need to make more money or spend less money or do both. Consider whether you can pick up a second job or sell anything. Find out whether you can pay less for some goods and services. For example, look into how to get low rates for your auto insurance. Meal planning may help you cut your grocery bill, and you might be able to bike or carpool to work to cut back on gas costs. If you have student loan debts, give the company a call. You may be able to defer them for a while depending on your income and the type of loan.

Choose the Right Payoff Method & Track the Progress

While you may have some high-priority debts you need to tackle right away, you might need some help deciding how to focus on other debts such as credit card bills. There are two schools of thought for paying down debt. One is that you should choose the debt with the highest interest rate and pay it off first. This is financially sensible, but if it is a huge debt, it may not be psychologically satisfying. The other is that you should pay off the smallest debt first to give yourself a sense of accomplishment. While this may not make as much financial sense, the method you are more likely to stick to is the best one, so go with it if it works better for you. Be sure to keep track of your progress along the way. Set smaller milestones and reward yourself along the way as you reach them.

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