Getting out of debt can do a lot for you. Debt keeps you from living your life to the fullest because it makes it so that you can’t get the money you need when you need it. It impedes your ability to own your own home, buy a new car when your old one breaks down, and it can even make it difficult to get hired in at a new company.
Debt can come from all sorts of things, it’s not just something that happens to people with careless spending habits and too many credit cards. Maybe you lost your home when the housing market crashed and you still owe on your mortgage. Maybe your spouse died and left a bunch of debt in both of your names. Here are some ways to start moving toward debt freedom, no matter how you got into debt.
Deal With The Calls And Letters
One of the worst parts of being in debt, aside from never having any money, is the phone calls. Debt collectors call at the worst times, it seems. If you feel like you’re being harassed by your debt collectors you can do something about it.
Don’t let calls from debt collectors scare you into giving out your checking account numbers. However, when you get a letter in the mail offering you a deal on paying off a debt for less than you owe, you should consider it. Just keep in mind that the amount they reduce it will count as income for your taxes the following year.
Check Your Credit Report/Score
Before you can really get out of debt you need to know what your debt looks like. That means you need to get copies of your three major credit reports and your credit score. Once you know what you owe and to whom, you can now start figuring out a payoff plan. This could be a good time to start looking into debt consolidation companies if you owe a good deal to many places.
Start Making Payments
Once you know who you owe, and especially when you can get a good deal on a payoff, it’s time to start making payments on your debts. Just remember that you didn’t get into debt overnight, it is going to take time to pay things off. Even when you’ve paid all your debts it’s still not going to instantly clear your report and your credit score isn’t going to magically go into the “excellent” credit area.
Cut Back On Spending And Increase Saving
While you’re working on your debt, and even after you’ve cleared it, you should start working on spending less and saving more. Cut back on your electric bills by unplugging, regulate your heat in the winter, use less water, and get rid of cable TV. Also start putting some money out of every paycheck in savings, no matter how little.