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10 Smart Steps.
It takes commitment and consistency, but the rewards
are worth it - both financially and emotionally. People do it every
day, and you can too. Here are 10 smart steps for tackling your debt.
- Curb Your Spending:
Freeze
unnecessary spending while you assess the problem and make plans to get
out of debt. Cutting spending can come in many forms. It may mean
passing on buying big-ticket items, or it may mean bringing lunch to
work or school rather than eating out every day
- Assess Your Finances:
Understanding how much debt you've accumulated is the first step toward
reducing it. Use our Debt Checker Calculator to determine the total
amount of your debt. It can be difficult to confront that total, but
it’s critical that you do.
- Set Your Goals: Set a big
goal. Pay off your debt in three years and then break this goal into a
series of smaller ones that will help you reach the finish line. Use
our Income and Expense
Cash Flow Worksheet to help get
you there. You can even get your loved ones to participate and to
motivate each other until you reach your goal.
- Create Your Plan: Put the
plan for reaching your goal on paper. The Debt-to-Income
Ratio Worksheet
and Debt Goal Worksheet may help you set targets for monthly expenses
such as utilities, groceries, medical costs, household needs, and
transportation. Set realistic targets and then try to spend even less.
Make hard decisions about how to squeeze more of what you earn from
your budget to pay off your debt. Don’t forget to budget for the
unexpected, such as replacing a broken hot water heater or emergency
medical treatment.
- Track Your Spending:
Using
the plan you've developed, track your spending carefully so you can
look for additional ways to save. The more money you can apply to your
debt each month, the sooner you should be out of debt.
- Pay Your Most Expensive Bills First: Interest can add up
quickly on debts of any size. Be sure
to focus on paying off the ones with the highest rates.
- Understand Interest and Late Fees:
Know your interest rates and what the late fees are on all of your
debts. Avoid late fees to ensure they're not adding to your debt, and
explore options for lower interest rates. If you can't make a payment,
call the banks or companies you owe and talk with them about your
situation. If you don’t understand or aren’t familiar with a debt term,
you can refer to our online glossary for help.
- Pay More Than the Minimum:
Understand how paying more than the minimum can be a critical first
step in reaching your goals. This is particularly true for credit
cards, though it may also be useful for paying other loans, such as
those used to buy furniture, appliances, or electronics.
- Reward Success:Commit to
achieving your goal and figure out what's going to keep you motivated
to stay on track. Consider sharing your goal with someone a "Debt
Coach" and asking him or her to help "keep you honest" by checking in
on a regular basis to see how you're doing.
- Be Patient: It probably
took you time to get into debt, so acknowledge that you're not going to
get out overnight. Keep yourself motivated. And remember, getting out
of debt will change your outlook on life. It's worth the hard work.
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