Wondering how to get out of debt? Is 2017 your year to achieve debt freedom? It all starts with a plan.
“Don’t resign yourself to the fact that carrying debt is a fact of life, because it’s not. In order to get out of debt, you need to make a conscious decision to change your attitude towards spending and to develop a specific plan with measurable steps,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“Like any change, success takes a commitment over time. But when you think about the considerable upside of living a debt-free life, it’s well worth the sacrifice,” says Schwartz.
Here is your step by step guide on how to get out of debt in 2017.
Commit to living within your means
Success in becoming debt-free is rooted in a change in behaviour. Like any behaviour modification, you need to embrace the decision to change and implement that attitude in your daily life. You’re faced with purchase opportunities many times in day. You need to place your desire to become debt-free at the forefront of your mind and let that change your attitude towards spending. Make a decision not to accumulate more debt and commit to spending within your means to achieve your goal.
Gather your debts
Getting rid of debt successfully depends greatly on developing a plan that is accurate. Accuracy can only be accomplished if you really know what you are up against. It’s time to lay all of your debts out on the table- literally. This can be shocking for some people, but it’s this kind of honesty that will help you reach success.
Create a budget
Possibly the most important thing that you can do to become debt-free is to establish a realistic household budget. In fact, there is a good chance that some of your debt problem might have been caused by not having a budget at all.
Be very specific in your budget line items. Earmark as much as you can for debt repayment.
Pick your target
The most effective way to pay down your debt is to target a single debt at a time. Cover your minimums on all of your cards of course, but pick the one with the highest interest rate first. You’ll be able to attack the debt principal more quickly if you can slap more money down on it.
Save, save, save
Even though the focus of your plan is to pay down debt, it is essential that you include emergency savings as part of your budget every month. The reason for this is that you need to have cash on hand to cover expenses as they arise. If you don’t, you run the risk of dipping into credit to pay for costs, erasing your progress.
Develop a tracking system
It’s not enough to plan your spending; you need to track it as well. This helps you identify if your budget is working, as well as recognize areas in which you can improve.
Plan to revisit your budget
It’s important to know that your budget is a dynamic entity, meaning that it changes depending on your circumstances. It is advisable to revisit your budget every quarter to tweak it as you need. If your budget is too strict or too general, you won’t get to your goal.
Get rid of credit access
The simple step of taking your cards out of your wallet or removing credit card numbers stored online can do a great deal to curb your temptation to spend. Get in the habit of living a cash-only lifestyle. If you are going to carry plastic, use your debit card or a pre-paid credit card.