Getting out of debt is a matter of making a strategy and sticking to it. For some with out-of-control debt, the strategy for getting out of debt will be much more complex. Some can get out of debt by simply starting a budget and reducing expenses. Others may be in an out-of-control debt situation and need strategies that include more drastic measures. Here are some strategies to consider when making an attempt at getting out debt.
Manage the Money You Have
The easiest strategy to implement when getting out of debt is to establish a budget and manage it. The strategy is simple and the goal is have more money coming in than going out. You may have to take action to cut expenses such as dropping some luxuries or reducing incidental expenditures like brown bagging it to lunch instead of buying it at a restaurant. If your debt is not out-of-control, budgeting will probably be the only strategy you need to reduce and get out of your debt. When you have fewer expenses than income you can direct the extra money to accelerated debt payments.
Get Money without a Loan
When your debt is out-of-control and you have more obligations than income it is time to take more drastic action. You will need to find extra sources of income without taking out another loan. The simplest way to do this is find an extra job but this does not always work for those with families. For Americans, a way to increase monthly income is to reduce federal tax withholdings. What this does is give you more money each month instead of waiting until tax return time. The way to reduce federal income tax withholding is to fill out and submit a new IRS Form W-4 with your employer.
Other ways to get money without a loan include freelancing any special skills you have, selling unwanted items in yard or garage sales, recycling unwanted discarded scrap metal and plastic, and other creative ways. For example, some with special skills will offer their services as a tutor for those studying the same skills in a university.
Lower Interest on Credit Cards
The biggest problem with out-of-control debt is that most of the money you pay to reduce it goes to interest and not the principle on your loans. Getting a lower interest rate when you are carrying several high balances is difficult to do so the key is to be patient. The first thing you will need to do is get a copy of your credit report and work to have any discrepancies removed from it. Then, you will need to call your creditors and ask them to reduce your interest rates. Be prepared for a no answer because with high balances, most creditors will consider you a high risk. However, there is no harm in trying and some have been successful. Another option for lowering interest on credit cards is to get a promotional balance transfer card but read the terms carefully and determine how the rates will change after the promotional time period.
Other Tools to Lower Your Debt
When things seem so out-of-control and unmanageable it is time to take even stronger action. Stronger action can include debt consolidation, debt management, debt settlement, credit counseling, and, as a last resort, bankruptcy. This stronger action must not include payday and other risky types of loans. You want to avoid bankruptcy only until you have exhausted every other option because this will stay on your credit record for at least 10 years.