Get out of debt

Eliminating your debt may seem like a rather daunting task from the outset, but like all major undertakings, it can be done by taking the first step and then persevering until the goal is reached.

It is commonly agreed that there are three major steps involved when beginning the process of working your way out of debt and these are the fact that you must stop acquiring new debt immediately, establish an emergency fund and start to pay off your debt.

The first step differs from person to person, but might mean some people will have to get rid of all their credit cards completely and for others just putting them away and refusing to make use of them except in an extreme emergency. The rational that you need your credit card(s) for convenience doesn’t hold water, and carrying them around with you means you may be tempted and end up further in debt in the long run. Once your cards are gone, cancel whatever recurring payments you may have. Change your phone to prepaid, look for cheaper car insurance, give up the gym membership if you never actually go. Actually, there are some really great home and motor insurance offers available at present, so even if you don’t have urgent debt consider this as a money saving option.

Step two suggests the establishment of an emergency fund to help you out should there be an emergency which you now cannot use your credit cars for. This can be done in conjunction with step three. For step two, save as much as you can for several months. Remember in moments of weakness that this cash is for a serious emergency and do not be tempted to spend it.

While you save your emergency fund, start to pay off your credit cards. Order your outstanding accounts from highest to lowest and make the minimum payment on each, except the one with the lowest outstanding amount. Pay off a little over the minimum amount due on this account, or as much over as possible. When this account is paid off, maintain the same payments on all your accounts, but put all the money you were using into your next lowest debt. This way you will see fast results and be able to pay off your accounts quickly. Another way is to pay off the account with the highest interest rate first, but it is not as satisfying as watching your payments begin to close one account after another as step three begins to snowball.

The most important thing when deciding to pay off your debt is to start immediately. The sooner you start, the sooner you will find yourself out of debt.

Please note that Churchill does not control and cannot guarantee the relevance, timeliness, or accuracy of the article above.