Simple Tricks For Getting Out Of Debt

Here are the four steps to take if you want to pay off your debt mindfully:

Admit you have a debt problem.
The first step in solving any problem is admitting you have a problem in the first place. Plenty of your co-workers, family members, friends, and neighbors are also trying to manage their debt too. Many of them just aren't talking about it for these two reasons: shame and denial. Shame and denial work together to sabotage your success. Since shame makes us so uncomfortable, most of us will do anything we can to avoid it. It can be painful to admit you are in the hole, but once you've taken that step, you start moving toward the light at the end of the tunnel.

Become mindful of the difference between needs and wants.
There is really only one source of debt: spending. And all of our spending can be broken down into just two categories:
- Needs like food, shelter, medical emergencies, household repairs, gas, etc.
- Wants like new experiences, luxury goods and services, the mindless acquisition of things, etc.
The distinction can be tricky since our wants often overlap with our needs. If you're trying to eliminate debt, be mindful of your needs and keep your wants in check.

Change your spending habits.
Spending creates debt, so if you are in debt, stop spending. This can be really hard to do, but each of us can take a conscious step to live more cheaply. Tracking where your dollars go can be tremendously helpful. Buy a spiral-bound notebook and write down every penny you spend during the next month. It will probably be easy to identify some "needs" that actually belong in the wants category. Documenting your financial behavior might make it easier to change your spending habits.

Create a debt reduction plan.
Start by gathering the most recent statements for each of your debts and create a one-page debt review that outlines your debt, the money owed, interest rate, payment, and order. Use the "order" box to determine which debt you'll pay off first, starting with your highest interest rate and working your way down. Next, total your monthly payments. This is the amount you'll pay every single month until you have knocked out all of your high-interest debt. Make minimum payments on everything except your number one highest interest rate debt. Any extra money remaining after covering your monthly needs should go toward this number one debt. Once you've paid off the first debt, direct your money to the next highest interest rate debt without reducing your total monthly payments. The money you no longer need to pay off the number one debt can now be applied to the number two debt. Repeat this process until you've conquered every one of your high-interest debts!