How to Get Out of Debt

How to get out of debt is a question being asked by lots of people these days. Getting out of debt sounds like a great idea to just about anyone.  I mean, who doesn’t like the idea of eliminating their debt and being debt free?  But if you’re like most people, your first reaction when you think about getting out of debt is something like, “Sure, it sounds great, but it’s easier said than done.”

While I agree that getting out of debt isn’t necessarily easy, I can show you how to get out of debt faster than you might imagine. The time it takes depends on a lot of factors, with one of the biggest factors being how much debt you have. Some people can be debt free in just a few months, while it might take others a few years. But make no mistake about it…..you CAN get out of debt, and doing so will be the biggest step you can take on your path to financial health.

This strategy of how to get out of debt assumes that you still have your job or your primary source of income. The process is known as “snowballing”, and properly applied, it can eliminate your debt faster than you ever imagined.

1. The first step is to list all of your debts in order, from smallest to largest. List them according to their balances, not according to their monthly payments. Include credit card bills, college loans, car loans, personal loans, mortgages, and any other debt you may have.

2. The second step is to make some cuts in the “discretionary spending” areas of your life. Your goal is to come up with an extra $100 to $500 per month that you can apply to debt reduction. Look for areas where you are either wasting money or where you can cut back. Examples might include dining out, entertainment, clothes, travel, etc. Get creative. The more money you can identify, the faster you will eliminate your debt.

3. Next, you want to focus on paying off the smallest debt balance you have. Keep making the regular monthly payments on all your other debts, but on your smallest debt, you should make your regular monthly payment PLUS the amount of extra funds you came up with in step 2. Keep doing this every month until that debt is eliminated.

4. Then you focus on the next debt on your list. Keep making that debt’s regular monthly payment PLUS the amounts you had been paying toward the debt you just paid off in step 3. Keep doing this every month until that debt is eliminated.

5. You keep following this formula for each debt on your list. Using this approach, the amount you are paying toward each debt keeps growing as you move down your list. This is where the term “snowballing” comes from.

Countless people have successfully eliminated their debt using this technique, and you can too. The key is consistent, focused effort.

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