Stop making these 7 money mistakes!

Five Tips for Getting Out of Debt

  February 24, 2014  |    #Eliminate Debt

Getting Out of Debt Faster

Getting out of debt can be extremely stressful, especially if debt collectors are blowing up your phone “like [it] is a disaster”. Often, we do not know how or why we got into this situation.

Meditate on how you got into your predicament.  If it was not due to an unexpected emergency, look internally to find out why you consumed so much debt so you do not repeat your mistakes.

People often find this as an abstract exercise, but there is a “why” inside of you. There is a reason you are in your situation today. Learning why this is so can save a lifetime of struggle.

Regardless of how you acquired your debt, here are five suggestions to get rid of it. There are many ways to get out of debt and many online lists that tell you how to do so. These are five of the most efficient ways of which we are aware.

1. Stop using credit cards

As Paula Abdul taught is in the 90s, progress is hard when taking one step forward and two steps back, so stop using credit cards and get caught up with your debt.

2. Reduce outliers in your spending

You probably do not need to think hard to know where you are overspending – daily Starbucks, hobbies, gourmet groceries, going out every weekend – all weekend and endless mall trips. Calculate your spending in all categories, including utilities, clothes, mortgage/rent and entertainment over the last few months, reduce the categories that do not make sense (you do not need to dress like a Vogue Homme model unless you are one) and send the difference to your credit cards.

3. Create an emergency savings account

Emergencies are the pimples of personal finance and can wreak havoc on our budgets if we are not prepared. While paying off debt, save $500 to $1,000 until you can increase your emergency savings to the standard three to six month’s worth of living expenses and minimize the financial impact emergencies may cause in the meantime by setting aside $10, $15 or even $25 a paycheck in a savings account.

4. Put extra cash towards your credit

Here is a novel idea; pay for the fun you already had rather than accumulate more debt. Use raises, tax refunds, bonuses and cash gifts from birthdays and holidays to pay off your debt more quickly rather than spending it or increasing your standard of living.

5. Ask your credit card companies for a rate reduction

Just as you can refinance a mortgage rate, you can ask credit card companies to reduce your credit card interest rates by telling them you are creating a budget and paying off your debts. If they do not budge, suggest that you have an offer from competing for bank to which you can transfer your balance – be sure that you do. None of these suggestions are difficult. Trying to adopt all of them at the same time maybe. Try one of two recommendations for a few weeks, and then adopt another one or two. In a couple of months, you will be able to adopt all of these like Angelina Jolie adopts babies.

In no time, you will start to see improvements in your financial situation. Use each gain as motivation to continue. Use each milestone as an example that you can do it, you can pay off your debt and be financially liberated.

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Avoid these 7 mistakes to get on the fast path to wealth.