5 Simple Tips on How to Get Out of Debt Fast

Debt can be stressful and debilitating.  Late payments, harassing creditors, looming lawsuits, maybe even imminent bankruptcy. It can take its toll.  All you want is to find out how to get out of debt fast.  But as your debts pile up, you’re starting to believe that isn’t possible.  You imagine years of never-ending payments, strained relationships, and sleepless nights.  And you want to give up.  Don’t.  Even in some of the most severe cases, it is possible to bounce back and get completely free of debt.  How?  By learning some simple tips, tips that every debt professional knows about, tips that will set you free.

1. Take an Inventory of Your Debts
The first thing you have to do is find out exactly how much you owe.  I know, it’s painful.  It’s the first thing on your list, but always the last to get done, if it’s done at all.  It’s like that old adage about admitting you have a problem.  Well, here, you’re admitting that you have debt and probably a lot of it.  So pull out the iPad, the laptop, or the old pen and paper and start taking an inventory of your debts.  What balances do you have?  With whom?  What are your monthly payments?  What’s past due?  What interests are you paying?  What about those fees?  Just get it all out there, and sum it up.  Painful, yes, but therapeutic, too.  Trust me, you’ll feel better once it’s done.  You’ll feel better because now you know.  You don’t have to keep wondering and worrying.  And you’re that much closer to doing something about it.

2. Prioritize Your Debts
Not all debts are created equal.  Some debts are big, some are small.  Some debts are secured by assets, some by friendships and some by only a signature.  You’ve got your list, but now you need to order it.  What do you want to pay on first?  In just financial terms, the secured debts should go to the top of the list.  Debts with the biggest interest rates should follow.  And then come the rest.  But not everything is about dollars and cents.  Maybe you owe to mom or dad, or to your best friend.  It may mean more to you to pay off a lower-interest or even no-interest debt to preserve a relationship.  Whatever the priority, you’ve got to commit to one.  It’s essential to creating a plan.    

3. Create a Payment Plan and Stick to It
The next part is easy.  Well, not exactly easy, but easier.  You know your debts.  You know which are most important.  Now it’s time to lay out a plan to pay them off.  Start with how much you make.  Take your total monthly income and subtract out the necessaries (food, rent, utilities, car payment, etc.).  What you’ll end up with is the potential amount you have each month to pay down that debt.  I say potential because there is wiggle room here.  You may not want to commit to a monk lifestyle to pay off your debt a few months early, and that’s understandable.  But once you know how much you have left each month to pay, run some scenarios.  If you were to put all of that into paying down debt, how soon could you get there?  Try at least a couple scenarios, each time adding a little bit more to the necessaries column.  Then commit to one scenario (plan).  This is important.  Once you commit, you’re not going back (unless you have some dramatic change in circumstance).  How do you stay disciplined?  Think of that money as already gone.  It’s been set aside.  You may have to actually set it aside in a separate account to convince yourself.  In fact, I recommend it.  You most definitely will have to give some things up.  But, trust me, it’s worth the price.  Imagine the day you submit that last payment on your credit card, and you owe no more.  Imagine the money you will save on interest.  Imagine the calls you won’t receive from annoying debt collectors.  It’s worth giving up a little, even a lot, in the short term.      

4.  Pay More than the Minimum
That leads to another important point, and to a revelation.  Here’s a little secret every credit card company does not want you to know.  Minimum payments on credit cards are a sham, designed to keep you in debt and lull you into a false sense of security.  Don’t believe me?  Do the math.  Paying nothing but your minimum payments will extend out your debt for years, and years.  That’s what the credit card company wants-–to keep banking on the interest and fees while your principal stays the same.  This is where discipline and clear planning comes in.  You have to pay more than the minimum to pay down debt.  The best way to approach this is one debt at a time.  Pay minimums on your lower priority debts and pay a high sum on your most priority debt.  If you really want to be aggressive, you may skip lower priority debt payments entirely and focus on the most crucial.  But be aware this will have a negative effect on your credit rating.

5. Get Professional Help
Last, to really learn how to get out of debt fast you may need to seek professional help.  No, I’m not talking about a shrink, not in the traditional sense, anyway.  I’m talking about a debt professional or consultant, someone who does this for a day job.  These come in all shades, from debt consolidators to debt settlers to debt counselors, and each have something different offer.  Some people think debt professionals offer little.  Every industry has its con artists, and financial services is no different.  But a reputable debt consultant can help in a number of ways, like negotiating better rates with creditors, obtaining a loan to consolidate debt, settling debt for less than you owe, and creating a solid debt payment plan you can achieve.  How do you know if you need professional help?  Look back to your monthly income.  If it’s coming up less than the total of your monthly payments, you may want to consider a debt professional to really understand your options on getting out of debt as soon as possible.  

Learn more about how to get out of debt fast today!