There are some financial advisors and experts out there that will say getting out of debt fast is impossible. That might be true for some people, but it doesn’t have to be true for you.
Creditors want to make money off of you, that’s why they offer interest rates on your loans or credit cards. If you’re determined enough to get out of the hole, then your actions and the choices you make can have a huge effect on how long it takes.
In this article, I will tell you all of the things you need to do to get out of debt and stay away. Everyone has different reasons for their financial mistakes, but I’m going to share the same exact strategies that worked for me.
In order to get out of debt fast, you will have to take action, and the fastest way is to focus on one area at a time. You can’t do it all at once or else you’ll never get out of your financial situation.
10 Steps to Getting Out of Debt
How do you get out of debt fast? There are many ways, and I’m going to share the ones that worked for me.
Step 1: Figure Out Your Budget
Your budget will be the foundation for all of your financial decisions. Without it, you won’t be able to make the correct financial choices. You’ll know where your money is going each month, and you will know exactly how much you can allocate toward your debt each month. Now that’s a start. If you need help creating a budget, use this free budget calculator to figure out exactly how much money is coming in and going out each month.
Step 2: Create an Emergency Fund
How long does it take to get out of debt? It depends on many factors, but the one thing that you must have is an emergency fund. An emergency fund will be there for you during a rough financial situation.
An emergency fund should be able to cover your living expenses for at least three months.
Step 3: Stop Spending
The next step is to stop spending. We’ve all been warned about frugal living, and that’s true. You can’t get out of debt if you keep spending the same amount each month. It doesn’t matter if it’s a cheap pair of shoes or a fancy hamburger, you can’t spend more money than you make. If you never make any money, then you’ll never get out of debt either.
Step 4: Pay Off Your Debt First
You have to start paying off your debt first. I’ve heard the saying that you don’t get the doctor until you pay the bills, and that’s true! The first thing you should do is pay off your debt. You’ll be responsible for it, and you’ll be able to tell yourself it’s making a difference. Make more money for yourself so you have some in the bank when you get your next job or get paid by your side hustle.
Step 5: Make More Money or Get a Side Hustle
The next thing you should be doing to get out of debt fast is getting a side hustle. You can do many things, and you can make extra money in your spare time. I like working on the internet, so I set up a website and started making money through Google ads. Many people like to sew, so they can sew clothes for other people and make an extra buck. It all depends on what your skills are.
Step 6: Don’t Start New Debt
That brings us to step six, which is don’t start new debt. Stick to the plan and don’t make any more financial mistakes. Your payoff should be you living with no new debt. It might take some time to get your debts paid off, but it can be done even when you have bad credit. This is one of the hardest steps to get out of debt, but it’s also the most important.
Step 7: Save Money
It’s important to start saving money. You should have a specific amount you want to save each month, and when you get paid, put some money away for yourself. When you start saving for retirement and other goals, the money will be there if you need it. You will have enough money to pay off your debts while having a small emergency fund.
Step 8: Keep Credit Cards as “Emergency Only”
Credit cards are there for a reason. However, they should be used only in emergencies. If you need more money, then get some through a high-interest credit card or loan. Never use a credit card for regular purchases; if you do, the interest rates will start to eat away at your emergency fund and leave you no room for savings.
Step 9: Only Pay Your Minimum
To get out of debt, you will have to pay your minimum payment. The minimum payment won’t go very far, but it will help you pay off your debts monthly. If you want to save money, then use a credit card that doesn’t charge an annual fee. You can keep paying the same amount and put saved money towards your debt instead.
Step 10: Don’t Use Credit Cards for Big Purchases
It’s important to use credit cards in small amounts, but don’t use them for big purchases. If you want to get out of debt and you want to save money, then don’t use an average of one credit card per month. If you do, your maximum limit will be much smaller, and take longer to pay off your debts. Stick to one card at a time and only make small purchases using it.
One of the biggest mistakes people make is not knowing how to manage their money. It doesn’t take a lot of effort, but it will definitely take some time. Don’t give up, and don’t get discouraged if you’re not progressing. Take action, and keep on at it until you get what you’re looking for.