Jul 24, 2017

Are you in a messy debt and want to pull yourself out of such situation? In this article, I am going to show you how to help yourself out. Debt can be very frustrating and humiliating; it is not what anybody would desire.

You have to understand that, putting yourself in debt or bringing yourself out of debthas to do with your habits; your way of life as related to your spending. So, to help yourself out of debt, you have to be willing and determined to change certain habits and following the steps listed out below:

1. Get Hold of Your 3 Months Credit Card and Bank Statements

Have you ever been puzzled on how you squandered your money before the end of the month? Sometimes you can’t even lay your hand on the things you spent the money on, and everything seems to be a mystery. Getting hold of your bank statements will open your eyes to realities.

Many experts on personal finance will always advise you to keep a trail of your spending so as to pull yourself out of debt, which of course is right. But I think the first thing is to look backward into your credit card and bank statements to recognize and eliminate / or reduce spending on things that are not necessary. After taking such steps, you can then keep track of your spending to know whether you are really following your guidelines or not.

2. Categorize Your Spending

After analyzing your credit card and bank statements, you have to revamp your budget. Look at those things you spend money on that are not really important, and then, stop wasting money on them.

Categorize your spending and keep them organized in an excel spreadsheet or some sort of table. The various categories may include utilities, medical, insurance, housing, food, etc. Then, list all the purchases on each of these categories as culled from your credit card and bank statements.

3. Evaluate Your Average Spending Per Month

I told you to use three months credit card and bank statements so as to have a clearer view of what your average spending is. Therefore, using the three months statement analysis, you have to evaluate your average monthly spending by dividing the total amount of money spent on each category by three.

Below is an example of what your average monthly spending may look like:

Food                           -           $570.50

Medical                      -           $  30.00

Clothing                     -           $  10.00

Housing & Utilities  -           $935.00

Entertainment          -           $390.00

Gym                            -           $195.00

4. Eliminate or Reduce Miscellaneous Spending

Having evaluated the average monthly spending, it’s time to cut down expenditure by eliminating or reducing the amount spent on certain things such as food, clothing, entertainment, gym, etc as your table may show. Remember, the above categories are just for illustration purposes; yours may differ or include other things.

5. Eliminate Auto-Payments

Turn off all auto-payments services, especially those set through online shopping. This will help you to be conscious of what you are spending money on, and also save you from overcharges. If there is a need to renew any payment, you should do it manually.

6. Negotiate With Your Creditors

At this point, you have to negotiate with your creditors to adjust your due payment dates to correspond with your income or give you lower interest rates. If all of your bills are due around the same time, spread them out throughout the month so that you are not paying everything all at once.

7. Eliminate All Overdraft Protections

Overdraft protection allows you to spend more than you have in your account, but with a usual fee of $30. This means that if you buy a product worth $10 using an empty account, you will end up paying $40 ($10 + $30) for such product, therefore, wasting $30.

8. Start Paying Your Debt In Order of Interest Rate

This is time to start paying your debt with the money accrued from your reduced spending. What you should do at this point is to make a list of your debts, arranging them from the one with the highest interest rate to the one with the lowest interest rate – having done that, start paying your debts from the one with the highest interest rate down to the one with the lowest interest rate. The reason for starting with the ones with higher interest rates is to avoid incurring bigger debts through interests. 

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