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How to Eliminate Debt

July 6, 2011

eliminate debtUnless you are one of the few lucky ones who was born with a silver spoon in your mouth, chances are you will struggle with debt at one point in your lifetime. Debt has negative connotations, but it doesn’t necessarily have to be a bad thing. Getting into debt can help you obtain a college degree, buy a house, buy a car, and get yourself started in life. If you have racked up some debt for these reasons or others, you should remember that eliminating it doesn’t have to be as hard as it seems. You should also remember that you aren’t alone. According to the U.S. National Debt Clock, the average debt per citizen is approximately $46,000 and per tax payer is even higher at more than $129,000. Let’s also not forget that the nation itself is more than $14 trillion in debt, so your debt shouldn’t feel too overwhelming by comparison.

The best way to get out of debt is to start on a small scale and work your way up. Pay the minimum amount each month on your larger debts and focus on the smallest one until it is paid off. This will give you the confidence you need to pay off your larger debts and know that you can do it. The smallest debt for most people is credit card debt. Since credit card debt builds interest, it is best to start paying this off as quickly as possible and avoid using it more than you can afford to in the future. Draw out your finances and set a strict budget to determine how much extra you can sacrifice each month after all other expenses are paid. This amount could vary each month so be sure to make a different plan every month. Once your credit card is paid off you can move on to student loans, hospital bills, dental bills, mortgages, etc.

Next, try to budget your lifestyle to save money the best way you can until your debts are paid off. This will require some tough sacrifices, but in the end it will be worth it to be debt free. One way you can knock down the price tag of your lifestyle is by eating in more often and only going out for dinner on special occasions. Eating out is one of the worst ways people waste money, yet it’s also the most easily rationalized because food is an essential item for survival. However, dinner for two can end up costing a pretty penny when you add in the tip, taxes, and all those other little add-ons they get you for at restaurants. Eat cheaply and at home as much as possible to save extra cash during the month. Pasta dishes are always economically efficient and are also versatile and delicious.

Finally, sacrifice all the surplus income you receive to your debts until they are paid off. It will be hard to practice this method of money management, but it will help you pay them off quicker than you expected. Financial surpluses typically come in the form of work bonuses (Christmas or otherwise), gifts, tax returns, etc. The most important rule of financial planning and getting out of debt is to cut your expenses down to the bare minimum of what you really need. This list usually includes: food, shelter, clothing, medicine, transportation, and things of this nature. However, you will have to use your own personal discretion to save as much as possible. For example, if you can bike to work instead of driving your car, you can save tons on gas and get in some good exercise too. Don’t get discouraged. Being debt-free is a huge relief and will be worth all of the sacrifice and hard work it took in the long run as long as you are willing to do it.

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