Are you in over your head? Do you need solid direction on what to do or where to turn? Are you in debt and the only way out appears to be bankruptcy? Do you want to avoid bankruptcy at all cost? If you answered "Yes" to any of the above questions then keep reading. I am going to give you some solid steps to getting out of debt that you can apply now and get out of debt while avoiding bankruptcy.
1st Step: Determine your necessities versus your luxuries. Make a list right now on a sheet of paper with the things that you have to have on the left side and things that you have convinced yourself that you had to have but instead are just luxuries on the right side. Let me help you with this one, the only things that should be on the left hand side of the paper are food, clothing, and shelter. Luxuries are things like cable TV, cell phone, 3rd vehicle when there are only two drivers. Now I know this is putting you into culture shock and you are probably fighting me on this one but we are trying to get you out of debt. If you are in debt then it is obvious that you can not afford all of the luxuries that you currently have.
2nd Step: Determine how much fat is in your budget. Fat, is excess money that is being spent on your luxuries.
3rd Step: Put that fat to work for you. The average person will find between $ 100 to $ 500 a month worth of fat. Use that money to start paying down your debt.
4th Step: Pay on the smallest debt first This goes against conventional wisdom that teachers to pay on the debt with the highest interest rate. Actually the name of the game is speed. You pay on the debt that you can pay off the quickest and this is almost always the smallest debt. So you will use the fat that you found in your budget and add that to the payment that you owe the least on. So for example if you owed $ 1,500 on a credit card and the monthly minimum payment (which is what most people pay) is $ 30. And you found $ 150 of fat in your monthly budget then you would pay $ 150 (fat) plus $ 30 (min payment you are already making) total of $ 180 on your next credit card bill. You would continue that until your bill is paid off.
5th: Just repeat with each debt. When the credit card bill is paid off just add the $ 180 each month to the next small debt. Continue this process each month. Continue this and you will be well on your way to getting out of debt.