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No Sweat! Get out of Debt!

Credit Wise (featured column)
by Jennifer Wallis

If you have ever needed to drop a few pounds, you may have resolved to eat healthier, skip the fatty junk food and start attacking the fat. After sticking to your diet while everyone around you noshes on forbidden foods, you may wonder, "Isn’t there an easier way?" The truth is that diet and exercise are the only sure ways to lose weight. There is no magic pill, no shortcut. It just takes plain old hard work and commitment. The same can be said for getting out of debt.

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I have worked in the credit counseling industry for 10 years now. People ask me all the time, "What can I do to get out of debt?" My answer is simple, "Stop charging, reduce your spending and start paying it back." They typically look back at me like I just told them that the sky was blue. They frequently follow up with asking, "Yeah, I know that, but isn’t there an easier way?"

You can buy any money management book on the market or take a course on budgeting like our own highly recommended Better Budgeting Class, and they may all have one very important lesson in common... there is no magic, cure-all tip to get your debt paid off overnight. It will take some hard work and commitment… just like dieting.

If you are tired of living with debt, you should start by asking yourself if you are really ready to make the commitment it will take to make that lifestyle change. Most budgets fail because people start them for the wrong reasons. Starting a debt repayment plan is something that you should resolve to do. If you’re married, you should discuss it with your spouse. It will probably mean a change in spending for the entire family. Just as extreme crash diets don’t work, neither does a crash budget. You will need to incorporate some small changes instead of drastic ones in order to stick with it long-term.

Once you decide that you are really ready, you can start by developing a good plan.

Here are some things that will help:

Spend healthier:

The truth is that you ended up in debt because you spent more than you made. Maybe you had good reason such as a job change or medical issues. It doesn’t really matter why you’re in debt-just that you’re ready to get out. Look at your spending habits and see where you can make some changes. If you eat out a lot, buy more groceries and cook at home more often. Examine where your money is going and look at ways to cut back.

Skip the junk:

Credit cards allow us to buy things we don’t need. You must stop using them. For emergencies, start saving money so that you don’t have to use credit cards. Stop buying things that are "wants" instead of "needs." A "want" should be something that you plan in advance to buy and something that you save for. Too often we spend so much buying things we want that we don’t have enough to pay for the things we need. You must break this cycle.

Attack the debt: 

Start by adding up exactly how much you owe. Decide how much of your income you can pay toward your debt each month. Keep that payment the same each month. As accounts pay off, increase payments to others. It is up to you if you want to attack the ones with higher interest first or lower balances. Then, just watch as your balances go down. You will find a huge sense of accomplishment and relief just from watching your balances get lower each month. It is actually fun to watch your progress.

Make it a lasting change:

Once you have your debt paid off, what will you do with the money you had been paying toward it? You can start looking into all kinds of options such as investments, CDs, and savings. Build up your retirement or a college fund. The spending habits you have learned while paying off your debt have taught you a discipline that will help you for the rest of your life.

I know that working to get out of debt is not easy. It can seem like you will never accomplish your goal. The key is to set mini goals along the way and track your progress. When you see that you are really making headway, you will be inspired to stay on course. With a few minor changes, instead of extreme ones, you can learn healthy spending habits that will trim the fat in your budget for life.

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Copyright © 2007 by Jennifer Wallis. All rights reserved.

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