Erasing debt is a process that requires ongoing work. Not only do you need to pay off what's already owed, but you also need to make sure the debt doesn't keep growing. The idea behind being debt-free is simple: You need to spend less than you make. You also need to make sure you change your attitude towards your money and debt.
Step 1
Make a list of all your debts from smallest to largest. If you have a credit card with a very large interest rate, you might want to put that one at the top, no matter the balance. Pay the monthly minimum towards each debt, but add additional money to the debt on top. Pay as much as possible towards that specific debt until it's paid off. Then move on to the next one.
Step 2
Reduce the amount you spend, and reroute any saved money towards paying off your debt. This is a good way to find additional cash without having to look for a second job.
Step 3
Negotiate discounts or payment plans with your debtors. Only accept an extension or payment plan if no interest is charged. Ask your credit card company to lower its interest rate or waives its annual fees. Reach an agreement about any past-due bills as well.
Step 4
Have a specific time goal on mind. If you know you want to pay off your debt by March or November, for example, you're more likely to stick to your plan and resist the urge to overspend so you can meet that goal.
Tips and Warnings
- Learn to budget. Budgeting will help you allocate more money and prevent you from getting into debt again in the future.
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