Sometimes it can feel like debt sneaked up on you, and now you have to deal with what feels like an overwhelming burden. No one wants to stay in debt, but it can be difficult to know where to start so you can take that first step and start building positive momentum. Taking control of your finances so that you can get out of debt will require some behavioral changes and a new perspective on what you value, but it can be done. Here is how you can get started.
- Take stock of your finances.
The first step toward taking control of your financial situation is to face it head on. If you have been in denial about how much you owe and pretending that unpaid bills simply don't exist, then it is time to face reality. This may be the hardest part of the process, but you won't get out of debt without assessing how much you currently owe.
- Stop spending.
It can be almost impossible to pay down debt if you're still making purchases on credit cards. If it is hard to resist pulling out that credit card, then cut it up or freeze it in a block of ice so that you will have time to think before making an impulsive purchase. Now may be the time to start understanding the difference between what you need and what you want. Cut your spending down to just the essentials and see how much you can save over the course of 30 days.
- Begin with small cutbacks.
If you go out to dinner every Friday with your friends and end up with a large bill that includes food and drinks, try hosting a potluck at your house instead. Instead of going to the movies a few times a month, rent a movie and enjoy some inexpensive entertainment at home. Start small and once you see how much you can save through simple steps, you will be motivated to continue to be creative with how you spend and save.
- Start an emergency fund.
Once you start having more money left over at the end of each month, it can be tempting to throw all those funds at your debt, but it is also important to plan for emergencies. One doctor bill or unexpected car repair can send you right back into a precarious financial situation that makes it even more difficult to get out of debt. Try to have a comfortable emergency fund in place before you start making significant payments toward your debt.
- Create a budget.
Making a budget will help you keep track of your regular bills so that you are making payments on time and reducing unnecessary spending. Set goals for variable spending that may vary from month to month, such as gas and groceries. Try to stick to these goals, but make adjustments as needed. Most importantly, set a restriction on how much you spend on wants, such as eating out and entertainment. A budget will help you better understand where you money is going and where you might be able to make adjustments.
If you are determined to get out of debt, you can make it happen. It all begins with taking a hard look at your current situation and finding ways to cut back on spending.