Sense & Centsibility Blog

How to Get Out of Debt

Debt can be a vicious cycle for many people. Paying month after month, year after year and not making much progress. Not to mention you end up paying much more than the original price of whatever you charged because of interest. So here are steps to break the cycle and get out of debt.

Dart boardStop Charging

The first, and most important, step is to stop charging immediately. Cut up your cards or do whatever you need to do to stop. If you're charging because you're short on money each month, there are steps you can take.

Do Your Budget

If you don't have one yet, it's time to write down your expenses and income and create a budget. This will show you clearly how much you make and where all the money is going. Don't forget about expenses that aren't monthly, like vehicle tabs, annual memberships or other annual expenses like school clothes, etc.

A great way to stick to your budget is to pull a fixed amount of cash each pay period (what is not needed for bills) and use that for non-necessities. Once that cash is gone, you're done spending for the pay period. It will definitely help you avoid overspending.

Create a Plan

Based on what you have leftover in your budget, determine what you can afford to pay extra toward your debts and then apply that extra money toward one debt. Choose the lowest balance to create wiggle room in your budget faster or the debt with the highest interest to save more money in the long run.

Get Free Financial Counseling and Check Into a DMP

LSS offers FREE financial counseling and will work with you on creating a budget and a realistic plan to pay off debt. A Debt Management Plan (DMP) helps you pay off debt faster, simplifies your payments into 1 monthly payment, and helps you save money in interest. Visit our DMP webpage to learn more and see if the DMP is right for you, or call us at 888.577.2227 for your free session or get started online.

Save When You Can

If you don't have an emergency savings account or only have a little money in it, try to build that up whenever possible. Use money moments like a raise, a bonus, or tax refund to build up savings because it will be your safety net if an unexpected expense pops up. Temporarily you can always go into crisis budgeting mode to add money to savings and/or to pay down debt faster.

If you have a bump in the road, that's okay...just get back on track as soon as you can. Remember: it takes time and effort but you can do it!

Author Elaina Johannessen is a Program Director with LSS Financial Counseling.