The first step to addressing debt is to acknowledge that it is an issue. The next step after that is for the person to sit down and figure out exactly where he or she stands. Surprisingly, many people don’t know exactly how much they owe, so it is important to calculate a firm number. Once the overall debt is tallied, the person should then add their income minus fixed expenses. The leftover figure is how much money the person can use to pay off his or her debt.
Curb the Cards
The biggest problem many debt holders have is eschewing the credit cards. But those who are serious about getting out from under that mountain need to complete this step. That means only living on earned income with just a debit card. Those who absolutely must have another options should opt for a charge card, which forces the holder to make annual payments. Above all else, it is important to make more than the minimum payments on any card.
Consider the “snowball” Method
This is a modern debt-reduction strategy that has proven successful for a number of folks. It conditions the brain to get in the repetitive habit of paying off credit card bills promptly while at the same time easing the sting of the large payments. The method is quite simple: a person takes his or her smallest credit card bill and focuses on that single one while ignoring the rest. The person needs to be rigorous in making regular payments as often as possible until that one small debt is fully paid off. Then he or she moves on to the next smallest debt and repeats. The changes in bill amounts should be incremental enough that the person hardly even notices the amount when they finish paying off that largest, final bill (hence the “snowball” method).
In the end, the ability to remain debt free often involves a conditioning the mind to think about money differently. It’s mostly through this method that people are able to adjust spending and savings habits for the long-term. In fact, financial experts recommend being diligent in maintaining an “emergency fund.” The general rule of thumb is to keep a minimum of six months living expenses on hand. Doing so will make the process of paying down debt relatively quick and painless should the need arise.
Amy Fitzgerald is a professional blogger that provides financial advice and tips to consumers. She writes for TitleMax, a title loan company.