Getting Out of Debt:
Steps for Creating Your "Getting Out of Debt" Plan
Getting out of debt isn't hard to do when you have a step by step plan
and you follow it as it was designed.
Now that you understand how important it is to make sure that your plan is
SMART, let's look at the
steps you are going to take to create your get out
of debt plan.
Remember as you are creating your "get me out of debt" plan:
- How important it is that the plan be easy to follow,
- Look for
ways to reduce
the principal of your debt
- You are in control of how well the plan works for you.
Steps 1 Through 4 for Creating Your "Getting Out of Debt" Plan
Now on to the steps:
- Start by Calculating Your
Debt.
If you don't know what debt you have, or how much you have then you don't
know where you are starting from. We have a great step by step guide to
calculating
your debt, including a free Debt Schedule (a pdf download) for you to
use. Be real with yourself. Go through all of your papers to make sure you
haven't forgotten or overlooked anything.
- Stop Using Your Credit Cards
There is no point in making a "getting out of debt plan" if you
continue to accumulate debt. So get rid of those credit cards,
cut them up, or give them to someone you trust for safe keeping. Hide
them away - maybe in the fish tank or the freezer. Just don't close the
accounts.
- Prioritize your Debts
In the following order:
Secured Debts first - Secured debts are debts
that have assets to back them up (they can be repossessed) - i.e. mortgage
payments in arrears, or Car payments in arrears
Debts that your wages can be garnished for
-
i.e. student loans, child support payments, alimony payments
Any debts for necessary services
- i.e. medical
bills, overdue rent
Credit cards and other unsecured debts - most
other debts - not secured by assets (like your house or car)
Family and friends
- Still important - but
chances are they will be more understanding then your creditors - they are a
lower priority (most friends and family won't put you into
bankruptcy) but make sure you share your plan with them and show them that you are
committed to the plan and to paying them back.
- Determine How Much of your Monthly Income you can put
Towards Debt
Repayment
Take a look at your income and your expenses. For an easy way to do this
take a look at our
Really Simple Budget Page. It outlines what you have to do to determine
how much you have left over at the end of the month to pay off your debt.
Under Debt Repayment in the Expenses part only put in the minimum payments
as you will have to make them each month.
If you find that you are in a negative position (your income is less then
your expenses) then start to reduce your expenses, until you have a positive
cash flow (your income is greater than your expenses). Take a good
hard look at your expenses and STOP SPENDING. Getting out of debt
will require changes in your spending and lifestyle. For other ideas on increasing the amount of
monthly income you can put towards paying off your debt check out
Easy Ways
to Pay off Your Debt.
Check out this
CNN Article about 10 families that Had enough with Debt and made a getting
out of debt plan for themselves!
Continue to page 2 of Creating your "Getting
Out of Debt Plan"
Debt Free Living
See how it is possible to live debt free and find the tools you need!
Avoid Debt
Debt Free Living - Debt Avoidance is the first step to living debt free!
Debt is Dumb
See how debt is dumb and how it causes stress and problems in your life!
Reducing
your Debt
There are many things to remember when reducing your debt
Create
your Get Me Out of Debt Plan
Learn basic structure to create your plan to get out of debt
once and for all!
Getting out of debt will most likely be part of your overall money management plan.
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