How To Pay Off Debts

Acquiring substantial debt is rather easy to do.  Digging out from under debt to see the light of day again can be more of a struggle.  Many programs and organizations are available to help you with this task, often for a significant fee.  The last thing you need when trying to pay off debts is another debt.

If you are determined and have enough self-control to get a grip on your finances, it is possible to organize your income and outlay and get yourself out of debt in a reasonable manner.  The first step should be simple enough: gather together a list of all of your debts.  Collect car payment books, mortgage statements, utility bills and, yes, that rather large pile of credit card bills you have somehow managed to accumulate.

Some debt is not going away anytime soon, such as mortgage or rent payments, car payments, and the like.  Other financial outlays will be static in your life forever, such as utility bills and insurance premiums.  Just because these bills are fixtures in your life doesn't mean you can overlook them and focus solely on that pile of credit card statements.

First, set aside the proper amount of money to pay those cost of living expenses (rent, utilities, and so on).  Next, calculate a reasonable amount of money to be used for food and the incidentals of living; this is a good time to consider ways to reduce your financial outlays in these areas.  The money left over after you determine these costs is what you have to work with to eliminate debt.

Review those credit card statements.  You must make at least the minimum payment required on each one.  Failure to do so will adversely affect your credit score and will lead to higher interest rates and greater difficulty obtaining financing in the future.  If you have any money left over after you've set aside the minimum balance payments it's time to go to the next step.  Select the credit card with the highest interest rate - not the highest balance.  Put all of your remaining money against the payment on this card.

Do the same thing next month.  Continue in this manner until that credit card is paid off.  Next, use all of the money you were using to pay down that credit card to pay against the credit card with the next highest interest rate.  Notice the pattern that is developing.  In due time, this method will clear those credit card debts.  It is imperative that you not continue to add to existing balances.  If this method is not effective enough considering your current income, a part-time job may need to be considered.  Even if you work just a few extra hours a week for a few months, this may be enough to pay down your credit card balances significantly.


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