Too much debt? Not sure what to do to pay it off? The following provides some guidance for get out of debt quickly.
Instructions
1. Analyze your earning and spending habits. The first step to getting out of debt is making a budget. Most people that get into trouble with debt do so because they are not aware of how much money they make and where it all goes each month. Making a budget will bring your financial picture into perspective. Once you see the big picture, you can start making the adjustments necessary to get you back on the right track.
2. Analyze your income. Take a look at how much money your household brings in each month. Go back through your bank records for at least three months and determine an average.
3. Analyze your debt. Take a look at how much money your household spends each month. Go back through your bank records for at least three months and determine an average. Look at expenses like mortgage, taxes, utilities, food, family obligations, health care, debt, transportaiton, entertainment, retirement and miscellaneous expenses.
4. List out your debts. Write up a list of your debts. Arrange them in order from smallest debt balance to largest. Be sure to list your monthly payment amounts and interest rates, too.
5. Determine a debt payment schedule. As an example, use the following budget data: total monthly income: $4,000; total monthly expenses: $3,500; debts: credit card A -- $500, credit card B -- $3,500, car -- $10,000 and house -- $90,000. In this example, there is a $500 surplus each month -- income minus expenses equals surplus. In the first month, you can pay off the first credit card. In the second month, you can take the $50 credit card payment we were paying on credit card A and apply it to credit card B, so your new surplus is $550, and in month two you can pay down credit card B to $2,950. Repeat this pattern until all debts are gone.
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