The Top Five Tips to Get Out of Debt

The number of people who would like to reduce or eliminate their debt is in the millions. Today, more so than ever, people want to know the best ways to get out of debt. Ways that actually work! Living under crushing debt is not living at all, and this can especially true for those who have families that they are responsible for. A simple fact is that the less debt you have, the better able you will be to take care of those you love.

Ways to Get Out of Debt - Money
Credit: By 2bgr8 [CC-BY-3.0 (], via Wikimedia Commons

Here are the top five ways you can start working on debt reduction right now.

Spend Less Starting Right Now

One of the most powerful ways to get started in debt reduction is to begin spending less right now. The less you spend the more funds you will have on hand to pay down on your debt. To get started, write down all of the things that you spend money on now. This list needs to be detailed and as complete as possible. If you buy your lunch, put it on the list. If you rent movies on the weekends, jot it down. If you normally take a cab to work, log it down. Everything you can think of needs to be on this list. 

Once the list is finished, study it carefully and consider what things you can do without while you are working on your debt reduction. You may be amazed at how much money you can keep in your bank account if you only go without a few things; things that honestly you can do without if you just put your mind to it. Other things such as cabfare can be reduced if you take the bus to work for a while. You get the idea.

Make An Attack Plan

This works for anyone who has credit cards or has debt in the installment form. Again, you will need to make a list. On this one, list all of your credit cars, the interest rates, the minimum payment, and the balance due.

Now, there are two ways you go about setting up your attack plan. The first way is to find the one debt that has the lowest balance due. The second way is to find the debt that is charging the highest interest rate. You decide which of these you want to attack, and you attack by paying more than the minimum on that one debt. This will reduce the debt faster. Once this debt is paid off, repeat the process and find the next debt that you want to eliminate. You can use the money you saved in step one above to get this step started.

Consider a Consolidation Loan

Before reading further, understand that a consolidation loan is NOT the best option for everyone. However, a consolidation loan can be very helpful to many individuals and families who have a lot of different debts that need to be paid each month. A consolidation load is basically a loan that you take out that pays off all (or most) of your current debts. This means you do not have to pay those bills. Instead, you will pay a monthly bill to the bank or credit union that provides the consolidation loan to you. More often than not, this monthly payment is less than the total of what you were paying on all of those other bills. You also save in that now you will be paying on one interest rate rather than on several.

The thing to watch out for, however, is the deal you able to negotiate with the lender. Some lenders are charging very high rates for these loans and those you should stay away from. Also, understand that in some cases, taking out a consolidation loan may affect your credit score.

If you do take out a consolidation loan and find that you have more cash on hand at the end of the month, use that cash wisely. Pay down on any remaining debts that you have or start paying down on the consolidation loan amount. Do NOT go out and spend it which is exactly what many people do.

Refinance Your Home Mortgage

For those who are buying their homes, refinancing your mortgage rate may be one way to reduce your monthly expenses, and in some cases, reduce that expense dramatically. Mortgage rates are lower now than ever before and if you can take advantage of those low rates you should do so.

Even so, before you refinance your mortgage, talk to an expert and get all of the information and facts that you will need in order to make the best decision. Often, the lender that now has your mortgage is willing to refinance to lower rates if that means keeping you from going to another lender.

Stick With It 

Sticking to a debt reduction plan can be as hard (or harder) as sticking to a diet. The truth is, however, if you want to see real results, you have to stay with the plan and be willing to stick with it through the long term. Most people did not get into deep debt overnight, and they cannot get out of deep debt overnight either.

If you are married or have a partner, consider making this a joint effort and offer each other support when the temptation to buy something new comes along. Keep your actions and results written down so you can SEE the progress that you are making. If you pay off a bill or credit card, give yourself license to have something special (but affordable) like a dinner out or seeing a movie.

It will take time to get out of debt, but it can be done. Millions of people, just like you, are working on their debt reduction plans right now, and there is no reason you cannot join them. Keep reminding yourself how nice it will be once you get these financial burdens off your shoulders. And, it will be nice!