If you have a mortgage, student loans, credit cards or car loans it can seem like there’s no end in sight. Getting out of debt just seems like something that will never happen. But you have to look at the right angles and see each cliff you reach as another milestone to climbing that mountain. While I’m no financial advisor, here is what I recommend after years of steadily climbing out of debt.
Know Where You Are
Before you can even think about fixing your credit, you have to know where you stand. You have to know your credit score and what’s on your credit report. If you don’t, you’re running blind. Who knows, there may even be a few things on your report that are mistakes. While many sites say they offer you free credit reports, many of them offer that only as an addition to some kind of service \'96 normally credit monitoring. Instead, do what the FTC says and use AnnualCreditReport.com to get a free copy of your credit report. You can only do this once per year, though.
Say Goodbye to Your Credit Cards
Yes. Just. Stop. Using. Them. Period.
I don’t care if you cut them up, put them in the back of your freezer or lock them in a safe deposit box. Just do something that makes it really hard for you to grab a card on an impulse. There’s some debate about whether you should actually close the accounts. Generally, I'd say not to do that. You want to keep those credit lines open or you can shrink your credit card debt/available credit ratio, which isn’t good.
Live Within Your True Means
Figure out what monthly expenses are absolutely necessary and cut back on the rest. If you have minimum credit card payments that you simply can’t make, then don’t be afraid to call them. In many cases, they‘ll be happy to negotiate a lower payment. They know if you can’t pay it then your account will likely end up in collections and they’ll end up losing money anyways.
You’re probably going to have to plan out a budget to stick to. What’s more important? Getting out of debt or having 600 channels to choose from on cable? That happy feeling you get from buying a new tablet is nothing compared to what you'll feel when you’re debt-free.
Attacking Your Debt
You have to choose which debt is the priority. Mint has good guide to choosing which debt you should pay off first. There’s really no single answer that’s going to be the best for every situation. So you'll have to consider the pros and cons of each one to determine what’s best for you. But go after one first and once that’s paid off, move to the next.
If you’re dug so deep in debt that you just can’t seem to wrap your head around it, then you might want to consider credit counseling or debt consolidation. Just be careful of who you choose to work with, as if it’s not a trusted, reputable company then you could end up with even worse problems. Top10 has some helpful details about a number of debt consolidation services so you can do your own research. Something else you should do is make sure they don’t have a lot of complaints or open cases against them. Start with checking with your Attorney General’s office or the Better Business Bureau.
Getting out of debt is going to take time and will require discipline. But it can be done. Make a plan. Stick to it. Get help if you need. And eventually, you'll enjoy being debt-free and can be proud that you took the initiative to get there.
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