5 Ways to Get Out of Debt


With a little bit of planning and hard work, it's possible to get out of debt on your own in as little as two years. Here are five steps to kick start your efforts and begin making progress from Day 1. 

Step 1: Stop Your Credit Card Spending

It's a simple truth that it's very hard to get out of debt if you continue use your credit cards. To protect your credit score, don't close your accounts. Find a way to take the plastic out of your wallet and place it in a place that will be difficult to access -- bury them in a coffee can or freeze them in a block of ice. However, keep one card hand for emergencies, but don't use it for impulse purchases.

Step 2: Organize Your Debts

It's impossible to make progress until you know where you stand. Collect your latest statements on all of your debt accounts and create a filing system that will help you stay organized. Many people find it useful to create a separate folder for each month with the statements that are due each month. This creates a simple way to track the bills as they need to be paid. 

Create a list of your debts, including your balance, the due date, new credit card purchases, and the required minimum payments. Determine your total required payment across all of your accounts, and compare this to your income and expenses to evaluate how much you can pay toward debt each month. Photocopy this list so that you can track your details each month.

Step 3: Make a Plan

Create a plan to pay off your debt using either a "Debt Stacking" or "Snowball" method. First, define the amount you'll pay toward your debt each month. Then, identify the first account you'd like to pay off and create a payment plan for the month. Pay the minimum payment to each account except for the account you wish to pay off first. Finally, allocate the remainder to your target account. Be sure to track your actual payments compared to your planned amounts. 

Step 4: Turn Clutter to Cash

Ever walk through your garage or basement and notice how many things you have that you rarely use? Take these seldom-used items and turn them into cash that you can apply to debt by selling them on eBay, Craigslist.com, or have a garage sale. Some stores, such as Buffalo Exchange, will buy your clothing. With a bit of work, you may be able to raise $500 to $1,000 that can be applied immediately to your debt reduction plan.

Step 5: Negotiate Lower Rates

A study by a Massachusetts consumer group found that 56 percent of people who called their credit card issuer were able to negotiate a lower interest rate. Those that were successful shaved about 5 percent off their APR. With just a few minutes, you can lower your interest rates and free up cash that can be applied to debt.

Following these steps will get you started on the right path to becoming debt free. What's more, you'll see visible results that will keep you excited until your debt reduction plan starts paying off. Remember: You can get out of debt on your own in as little as two or three years by following a plan. Before you know it you'll be debt free!

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