if you’re in debt, chances are you’re feeling overwhelmed right now.

Nobody likes to owe anyone – and by the time we actually seek out an exit strategy, it’s when we’re already consumed with anxiety or worry about how to handle the massive load and obligations.

Make this your year to get out of debt and be free from what seems like shackles chaining you down. Right now, you might not be able to see the light at the end of the tunnel – but it’s very doable if you make a plan and stick to it.

There are five easy steps you can take to become financially self sufficient – where you not only don’t owe anyone anything, but you’re also capable of saving up money so that you never get in this situation again.

 Step 1: Par Down Spending

This is perhaps the hardest step of all. And unfortunately, it’s the first one you have to master. You didn’t get into this debt riddled life because you were thrifty – you got here because you were a spender.

You might look back and think, “But we needed that…” and maybe it was a vacation or some sort of fun activity for the family. You might excuse the purchases because you did it “for the right reasons” – to bring happiness to your world.

However, if you get honest with yourself, there are many ways to bring happiness and putting yourself in debt just cancelled out whatever joy you did experience from that outing or purchase.

So step 1 is to stop it. Stop the spending of things that aren’t absolutely necessary. This won’t feel comfortable to you at first. You’re going to long for fast food or movies and fun – but keep in mind that this is only a temporary discomfort.

All we’re trying to do is put a tourniquet on the bleeding of cash that you’re doing so that you can clean up the mess. Then, once you’re free of debt, you’ll have cash you can spend on all of those luxuries and goodies – and you won’t have to suffer an ounce of guilt in the process.

This is such a good feeling that you’ll realize once you’re in that place, how much earlier you should have gone through this discomfort so that you could live life to its fullest in a cash-only lifestyle.

What kinds of things should you stop spending money on?

• Name brand anything – go with store brand whenever you possibly can and save HUGE on groceries and other tangible items you use.

• Cable TV – par this down to the bare necessities. Yes, it stinks having to miss your favorite shows, but guess what? They’re going to be watchable later – on Netflix (when you can pay cash for it) or on DVDs. It’s temporary.

• Fast food – this is a big waste of money. The food doesn’t go as far, and it’s not as nutritious anyway, so kick it to the curb for awhile.

• House bills – turn off unused appliances, for example and save money on your electric bill. If you have a home phone you never use, get rid of it and just use your cell instead.

Once you start cutting down on what you spend, and challenge yourself, it can become addictive to see just how much you can save where you once splurged. Make it fun for your family – ask them to challenge themselves and see where they can cut costs, too.

Step 2: Sell Off to Pay Off

There is probably a small treasure trove right at your home that you don’t even know exists right now.

This is stuff that you can flip into a small bonanza of cash – and use to pay off some of your debt!

Think about things you never use anymore. Your child might outgrow their clothes quickly. You can list a box of size 7 kid’s clothes up on eBay and get a nice hefty sum for the bulk buy!

Sometimes it’s an individual buying it, and sometimes it’s a gently used clothing store owner.What about old jewelry you never wear? Turn this into cash too. You can sell it online on an auction site, or go somewhere local to find out how much you could get for it that could pay down your debt.

Movies and TV shows that are on DVD and Blu Ray discs sell pretty well. You can sell these on auction sites and get more for them than you would turning them into a local store that accepts them.

Look at eBay and see what buyers are currently grabbing up. They go after books, clothing (especially jeans), accessories, electronic gadgets and more. You just have to create a listing, wait for it to sell and then ship it out and collect your cash!

Don’t be tempted to spend it on fun stuff, though. Keep in mind that when you get payments, it’s supposed to go toward your debt so that you can finally be free of this monster once and for all.


Step 3: Get a Better Line of Credit

One way you can become debt free is to stop spending needless money on interest charges. Have you ever carefully looked at your credit card statement? There’s an area where it shows you how long it will take you to pay off your debt if you only pay the minimum.

This is a very depressing area of your statement, but use it to motivate you. You don’t want to take 20 years to pay off a lender, do you? But that’s exactly what some consumers are doing!

Call your lenders and ask for a better credit card interest rate. They can shave a point or two (or more) off of your rates once your credit begins improving or your income goes up.

Having a proven track record is very important, so try to never miss a payment – even if it’s because of a simple error like a lost piece of mail or because you “forgot.”

At the same time, you want to ask the lenders for a higher line of credit. This is NOT so that you can go charging up even more debt! Resist the urge to spend whatever new lines you do get.

The reason you want to do this is because credit scores are partially based on your debt to availability ratio. So that means if you have a $1,000 limit and you’ve charged up $1,000 – you have zero availability.

You ideally want to keep your credit lines at least 50% available – preferably 80% if possible. This gives you a big boost in your credit rating, and in turn, lenders will give you a lower interest rate.

When your interest rate goes down (either by you increasing your score or by asking for it), you pay less for your debt and you can use those additional savings to help you pay off the remainder of the money you owe to those companies.

Some companies will automatically do this for you. You might get a letter in the mail one day and discover they’ve raised your line of credit automatically. Or, you might find that you’ve qualified for a lower interest rate.

But don’t be afraid to ask for it. It won’t hurt, and it might help! Most companies have timelines for when you can ask or qualify for a change, so just ask about that when you call.


Step 4: Pick a Payoff Route

So how are you planning on tackling this debt monster? We know it will be step-by-step, but which route do you want to take? You have choices! In fact, you have three choices, the third of which combines the first two.

Choice #1 is when you use the debt snowball approach.

Dave Ramsey teaches this method. You organize your debt from smallest amount owed to largest. You pay off the smallest and apply that minimum payment that you were paying to the next in line, and so on.

Choice #2 is when you take the sensible financial advisor route and go with paying off your debt according to interest rate charges. So when you organize your debt, you’ll list it in order of highest percentage rate to lowest, and start paying off the highest ones first.

Choice #3 is for those of you who can’t decide which is best. Here’s what you do in those situations. Have two lists – one for debt amount owed, one for interest rates.

Then you alternate. The first bill you pay off is your snowball method bill. The second one is your high interest rate bill. Keep going back and forth and that way you feel confident that you’re making good headway on both approaches.

Don’t be one of those people who close their accounts once they get them paid off. This can actually hurt your credit score. You want to be able to show future lenders (for mortgages etc.) that you have a long track record of paying your bills on time and even after paying it off, that you maintain a responsible management style of your credit lines.

Keep track of what gets paid off. You’ll love seeing how the scales tip from debt owed to debt paid, and it will be very rewarding to look back on what all you achieved once it’s over.

Now here’s one small key to success: pay whatever you have, whenever you have it. That means if you end up with $5 left over in your bank account and nothing to spend it on – do a bill pay process through your bank to send it in to one of your credit cards.

Using bill pay options, it won’t cost you postage or a check – it gets sent by the bank to the lender directly. You’ll be amazed to see how fast those little $5 and $10 payments add up in helping you get debt free!


Step 5: Become a Saver

Here’s the last – and very important – step to becoming debt free this year. You have to start saving. Yes, even among your debt payoff process, you have to start putting some money away, too.

Every little bit helps – just like you’re doing with that extra $5 or $10 left over to go toward debt. Try making a plan to put a little back for those times when you will need extra money.

What should you save for?

First, save for an emergency – that might include a car repair, service professional (like a plumber or locksmith), and for the event that someone loses his or her job.

Ideally, you’ll have three to six months’ of expenses saved up, but for starters, shoot for an even thousand. Having a thousand dollars helps you stave off anxiety about not being able to afford it if something happens like a drain clogs.

There are of course other things you’ll eventually be saving for. Those include things like retirement, household furniture, vacations, and other tangible or strategic things you want for your life.

But before you begin saving for those things, you should put all of your money toward old debt. Once you’re free of debt, you can start saving up for the good things in life – the luxuries and enjoyment you want, but can’t afford right now.

Using this five-step process, you’ll start to see dramatic changes in how you feel about money. You’ll be responsible and motivated to work hard toward your goal. You might even pursue an increase in your income to help you hasten your efforts even more.

Will there be setbacks? Probably. Life’s not a straight line – there are curves you have to navigate, and you might have something happen like a leaking plumbing fixture that you have to charge because you haven’t yet saved up any sort of emergency fund.

Don’t beat yourself up about it. Just work the plan as well as you’re able to and soon, you’ll start reaping the rewards of your new financial savvy. Just think – this time next year, you might be planning a luxury vacation instead of planning how to pay off creditors! -AndrosForum


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