Simple Steps to Ditching Debt


If you are experiencing financial hardship, it may seem like paying off your debt is an impossible task. However, you can regain control of your finances before the situation gets worse. And once you pay off your debt, you can start using your money to build a better future. Here are several ways to help manage your debt:

Contact your creditors

The Federal Trade Commission’s Bureau of Consumer Protection advises contacting your creditors to let them know about your financial difficulties. Explain your situation to them and try to negotiate a more manageable payment plan. Don’t enroll in a debt management plan or jump into a debt settlement program right away. Settlement programs are risky and could lead to further debt.

Plan a budget

Start by figuring out your total income. Then, keep track of your spending for one month to get an idea of how you can direct your cash flow differently. Factor in expenses that do not change from month to month, like insurance premiums, car payments and rent or mortgage payments. Include expenses that fluctuate, like clothing, recreation, food, shopping and restaurant costs. This is a good way to see where you are overspending. If you want to be more precise, list yearly costs, like birthday presents and taxes.

Earn extra income

Look for ways to utilize your talents to earn extra cash. If you are a teacher, look for tutoring opportunities. Do you play an instrument? Perhaps you can utilize your musical talents to offer piano lessons. Also consider selling unnecessary items on sites like eBay.

Pay off credit cards

Focus on paying off your credit cards that have the highest interest rates and pay the minimum on other cards. Keep one or two credit cards with low interest rates for emergencies. If you must keep using them for purchases, get into the habit of trying to pay the full balance each month. Avoid using retail store credit cards, which have notoriously high interest rates.

Cut unnecessary expenses

Prioritize your payments. Not using that gym membership you still pay for? Cancel it. Do you really need the extra television channels? What about your Netflix account? Consider ditching luxuries you don’t really need.

Talk to a credit counselor

The Bureau of Consumer Protection suggests working with an organization that offers in-person counseling. A credit counselor can help you develop a personalized budget to pay down your debt. Your counselor may suggest that you enroll in a debt management plan and offer you advice on money management and budgeting.