Erase Your Debt: Simple Steps to Get You Back on Financial Track

by James on June 8, 2017 · 0 comments

pencil-1277094_640Being in debt can feel like you are carrying an extra burden of weight on your shoulders and can even dent your ambitions and plans, which is why it is a good idea to develop a simple but effective strategy to help relieve the pressure and get your finances back under control.

Here are some straightforward ways to create a path toward being debt free and in greater control of your financial destiny. Including a look at why it matters to approach your situation with realism, a plan of action to follow, plus a simple tip to avoid adding to your borrowing.

In denial

One of the worst things you can do is to bury your head in the sand and hope your debt situation improves, or to not have an accurate picture regarding your current levels of borrowing.

You are not exactly alone if you have credit cards and loans outstanding in your name as it’s estimated that about 80% of American citizens are in debt right now.

It can sometimes feel like the odds are stacked against you as there doesn’t seem to be much in the way of school education on how to handle loans and credit cards and the majority of lenders are not exactly going to help with advice on how to clear the balances they are charging interest on.

Your first step toward getting your finances under control and erasing your debt is to work out exactly how much you owe in total.

If you are going to get help from someone like or formulate some other strategy to draw a line and start to work on creating a debt-free future, you must start with a dose of realism and face up to exactly how much you owe.

Too many of us don’t want to look at the credit card statement or add up the total of all the loans we are paying back monthly, but without that vital information, you can’t expect to formulate a plan that is going to actually work.

Stop borrowing

As well as working out exactly how much you owe and what it is currently costing you in monthly payments you should also make a commitment to not adding to your debt burden.

Borrowing to clear your existing balances and consolidating is one thing, but signing up for a new credit card or loan is something altogether different.

The path to getting your finances under control starts with an accurate assessment of exactly how much you currently owe and also includes making a promise to yourself that you are no longer going to use debt to fund your lifestyle.

Prioritize your debts

A scatter-gun approach to clearing your debts is not going to be anywhere near as effective as developing a strategy where you make a list of what you owe and then put them in order of priority.

You want to clear the balance that has the highest interest rate first and then work your way down the list, once you have cleared the most expensive balance.

The reason for doing this is simple. If you are paying back the minimum balance on a debt with a 15% interest rate and are doing the same for a credit card with a lower interest rate, you are missing out on the opportunity to save a substantial amount of interest charges.

Work out how much you have available each month for paying off your debts. Make some sacrifices with your lifestyle if you can and make savings on groceries and other regular expenditure where you can so that you free up more of your monthly cash that can then go toward clearing debts.

Pay as much as you can off the most expensive loan first and then make the minimum payment required on the other balances. This will ensure that your most expensive loan gets cleared quicker and you end up paying less in interest charges.

Once you have cleared the first debt, work your way down the list and prioritize the most expensive debt remaining, continuing this simple but effective strategy for as long as it takes.

Don’t forget to plan for emergencies

One of the most common reasons why people’s financial plans go awry is when an unexpected bill has to be paid and they don’t have the spare cash available.

This can often mean you resort to borrowing money by taking out an expensive short-term loan or adding to your credit card balance.

As part of your financial strategy, you should always try to create an emergency fund that has between $500 and $1,000 in an accessible separate savings account. This way you can “lend yourself” the extra money you need and then put it back when you next get paid or over a couple of months, rather than adding to your debt burden.

Clearing your debts and being more financially savvy is not really that difficult and it just requires a bit of discipline, but you will be excited by the results when you see your debt starting to disappear.

Francesca Hayward is a personal financial advisor who loves to help people get back on track. You can find her articles on many family and finance websites.

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