Going from deep-in-debt to debt-free isn't necessarily a quick or easy process, but it's doable. It starts with changing the way you think about debt. If you want to get out of debt and stay out, these are some things you must do.
Start by figuring out where your debt stands. One of the quickest ways is to calculate your
debt-to-income ratio, a percentage that tells you how much your income goes toward paying debt. High debt-to-income ratios indicate that you're overwhelmed with debt. You might not need a calculator to tell you that, but seeing the facts and figures will help you come to terms with where your debt stands.
One of the hardest habits to break will be the habit of using your credit cards. If you've been using credit for awhile, you've undoubtedly gotten used to the convenience of delaying your payments and buying things you don't have cash to cover. But, the more you charge, the longer it will take you to pay off your debt completely. If you want to become debt free, you have to stop taking on new debt.
A budget is nothing more than a plan for spending your money. If you don't have a plan for your spending, you might as well toss your money into the wind. It may seem like you're doing fine managing your money without a budget, but you probably wouldn't be in debt if that were true. A budget will help you make the best use of your income, find leaks in your spending, and put together a plan to pay off your debt. The sooner you
create a budget, the better your wallet will feel.
Many people wind up in debt because they spend more money than they actually bring in. On paper it sounds impossible, but if you factor in credit cards and loans, you'll see how easy it is for your spending to exceed your income month after month. If you want to pay off your debt, you'll have to bring your spending down
below your income. That may mean cutting out some frills for awhile, but you'd be surprised at how quickly you can adjust your lifestyle.
It's easy to convince yourself that you "need" to purchase a new tv or that you "need" to go on vacation. The truth is, there aren't that many true needs in life. You
need food, shelter, clothing, transportation, and things like that. You
want steak, a nice house in the suburbs, designer labels, a luxury car, and so on. Part of living within your means involves saying "no" to things to some of those nice-to-haves that stand in the way of your debt-free life. It also means avoiding the tendency to call something a need when it's really just a want.
