How to Get Debt Free

 Budgeting is the most critical step in How to get Debt Free, if you don’t know how much you spend and on what you spend it on then how in the world do you think you can ever get debt free. Budgeting is not rocket science but it is like pulling teeth to most people. I think the reason for this is most people think it will limit them on what they can buy. This is true to a certain extent but if you budget correctly then it could possibly mean you can afford what you want. By this I mean that if you budget then you will learn your spending habits and can cut out the meaningless spending thus providing you with the means to afford what you think you can’t. We all spend on things that we shouldn’t and at times that we shouldn’t, that is called splurging. Think about it if we don’t splurge then that might lead to more money in our pockets, it will definitely mean that you can pay more on your debts.

Budgeting is definitely the most important tool that you can use to get debt free, and without a budget then it will be very difficult to get rid of your debt. This should be the first step you take in your quest to become debtless. There is plenty of budgeting software available some that are free some that you can buy and there is always the spreadsheet that can be used. It is not that hard to create a spreadsheet for your budget, it may take a little bit of effort. If you don’t know anything about creating a spreadsheet then there are books that teach you for example Excel for Dummies just to name one. By using a spreadsheet you can make your budget as simple or complex as you want just depends on how much you know or want to learn. The main thing here is just to start your budget as soon as possible thus getting debt free sooner.

To be real honest with you developing and keeping up with a budget is a real challenge to most people including myself. If you are in business for yourself or work for someone that requires you to make a budget for your department you know how important it is. Everyone should have a budget, including you, and is a must for anyone wanting to get debt free. It is not hard to develop a budget but the real challenge lies in keeping up with your spending to the degree that is required to keep an accurate budget, and that is exactly what you need to do. The biggest obstacle is “yourself”, whether it is procrastination, lack of knowledge or just don’t know where to start. You have to overcome “yourself”, and when this happens you have won the biggest battle on How to get Debt Free.

Let’s now examine the steps to creating a budget….

First thing you need to focus on is your income; write down your income (take home). This should include all of your income.

Next comes the expenses, the first group of expenses should be the essential expenses like house payment, utilities, insurance, healthcare and food, anything that are essential.

Next list your expenses that are luxuries like eating out (entertainment), gym memberships, subscriptions and etc. you know what your luxury items are so write them down…..everything….

Now list all of your credit card debt, by each card and list top to bottom by the interest rate you are paying. The higher the interest the sooner you want it paid off.

After you have everything compiled you need to take your essential expenses and subtract this number from your income. This amount will be the basis for your debt reduction. Now don’t cheat on this step by listing any of your non essential expenses in your essential bucket, this will only hurt you and your chances to get debt free. BE HONEST WITH YOURSELF!!

With the amount that you have left you will need to figure out your minimum amount of all credit card payments combined and subtract that amount, then with the remaining amount you will need to figure out how much is left to apply to the highest interest credit card. The more that you pay the faster it gets paid off. You have just created a Budget.

Now the next point is up to you…if you have to have any luxury item choose wisely with something that makes sense to keep, but remember you are trying to get out of debt here so you can’t keep them all. Make sure that you can apply maximum money to get rid of credit card debt then we will work on something else. This is How to get Debt Free.

Once the highest interest credit card is paid off then start on the next highest and so on. One important thing to remember is to NOT CHARGE ANYMORE ON YOUR CREDIT CARDS!!!!!