Getting out of debt is much harder than getting into it. But you can do it — and along the way, you’ll rid yourself of a lot of stress.
Countless people find themselves drowning in debt simply because they can’t control their spending. If this sounds familiar, try tracking everything you buy for a month, including all those “little” items that cost just a few dollars. Once you see how those purchases add up, you’ll realize how important it is to lay out a budget and stick to it.
Understanding how much you actually spend is a good first step, but that alone won’t get you out of debt. The following strategies for managing different types of expenses — and bringing in some extra income — can you help you reach a happy, debt-free future.
Control your credit card usage
If credit card debt is the problem, take these steps right away:
- Cut up your cards: Save one card for use in emergency situations. Cut up all the others, and throw away the pieces.
- Pay with cash: Only pay cash for purchases such as groceries, clothing and gas.
Attack high-interest debt first: Pay off the credit card with the highest interest rate first. Once this card is paid off, apply what you were paying on it to the card with the next highest rate. - Negotiate a lower rate: Negotiate your interest rate with your credit card companies. Your issuer will usually work with you if you say you’re going to transfer the balance to another card with a lower rate.
- Cut some recurring expenses
Most people have recurring monthly expenses that can be eliminated, including:
- Excess phone service: These days, most people use cell phones. If you have a mobile and a landline, you probably don’t need both. Pick one and stop paying for the other.
- Satellite/cable television: Consider disconnecting satellite or cable service and replacing it with a streaming service, such as Netflix or Hulu. You can get entertainment at a fraction of the monthly cost.
Keep an eye on your indulgences
We all have little indulgences we like to spend money on here and there. And while we enjoy them, we often don’t realize how much they add up. Here are some examples:
- Specialty coffee: Stopping by Starbucks on your way to work every morning is certainly a luxury you enjoy, but you could save money by making your own coffee at home. Maybe it won’t be as tasty, but it will do if you want to save $25 or more a week.
- Fast food lunches: If you work outside your home, chances are you buy lunch out at least a couple of days per week. These costs mount quickly. Even if you spend only $40 per month eating lunch out, that’s $40 that could go to your savings account or toward a credit card payment.
Bring in extra income
When you lose control of your finances, getting out of debt requires serious action.
- Take a second job: No one wants to work 16 hours per day, but if that’s what it takes for your family to thrive financially, then it must be done — at least temporarily. It may be that working an additional, part-time job for just 20 hours or less per week is all that’s necessary to help you out financially.
- Sell things you don’t use: Many of us keep things we no longer need in the basement or storage shed. Sell any item you haven’t used within the last year online or have a garage sale. You can bring in a tidy sum of money simply by cleaning out a bit.
- Sell your (extra) car: If you’re a two- or three-car household, chances are you could make do with one less car. Consider selling one if it isn’t a necessity.
Reduce debt — and stress
These are just a few tips and ideas that will help you get out of debt, but of course, it’s no easy task. It requires work and a commitment to doing what it takes to reduce your expenses-to-income ratio. Once you make that commitment, you’ll find that your bank account grows and your stress level decreases.
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Source/Disclaimer:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. LPL Financial representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial. This material has been prepared by LPL Financial., a registered investment advisor, member FINRA/SIPC. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such entity. Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit © 2014 LPL Financial LLC. All Rights Reserved. The information contained herein has been prepared by and is proprietary to LPL Financial. It may be shared via social media in the exact form provided, in its entirety, with this copyright notice. LPL Tracking #1-504066