It’s not an easy road to walk on. The journey can be long, tough and sometimes impossible to continue. You have to weigh your different options and find out which debts do you want to work on before getting started. Some may take the snowball approach while others may like to pay off those one that are adding up with the highest interest rates. When I was out of my high school, I didn’t have too much of credit card debts like my other friends had. But I was conscious enough to feel that whatever may be the amount, I have an outstanding balance to pay back to the creditors. I did all kinds of jobs that was possible to me and wanted to pay back the $6000 that I owed. I restrained myself in a lot of ways so that the balance amount didn’t rise further. I worked for extended hours to reduce the total amount of debts and walk on the path towards a debt free life. I was aware that I have to pay back the dues first before I diverted my mind towards having a saving. The saving that can create is of no use until I had the obligations to pay back to my creditors. So, even if I did savings, that all went towards paying back the creditors. Here are few tips that you many people might find useful in their situation as it worked in my case.

• Don’t incur new debts while trying to pay back your existing debts: Some people may want to cut their credit cards into four pieces or put them in a bag and zip it, but you have to give a thought on why are in a situation like this in the first place. You have to identify the reason of being in debt. It is always wise to use cash to pay the items as much as possible. If you can’t use the credit card and have the tendency of falling in credit card debts, this card is not good to use. Work on some kind of plan so that you are aware of your spending and can always keep a check on it. Do whatever you can so that you don’t fall into this kind of situation again. I always like to review my bills and even if they are paid off, I always keep a close watch so that I know that my spending is going down.

• Cut back your existing spending habits: Eating out and paying through credit card is the first thing that you have to check when you are in debts. Sometimes, if you take drastic steps, it can make a big difference, like disconnecting your landline phone and just keeping your cellular phone, or giving up television altogether so that you don’t have to spend on cable connection. Think how much those dollars times 365 can bring down your expenses in the next year.

• Use free services or low cost services: I like to read books and I used to have a huge collection of books in my personal library. This means that I used to buy different good quality books for my library. But now I have changed my purchasing habits and mostly prefer to go to the public library. I am still a book lover but I have learnt to save some money and not do extra spending. Now, when I am using the public library, I get some extra facilities like free magazine swap table, free CD borrowing, and $1 DVD/VHS rentals–for a week. I get few more things from the library that benefits me in the long run. The idea here is to save money and not doing extra spending.

• Try to get reduced interests and use balance transfer options: Sometimes, if you want to get a good interest rate on your credit card, the credit card company will offer you another card. There’s lot of competition around and the credit card companies will always open ways for you to pay them back either by one card or another. They don’t want you to stop making payments. You have always heard of this balance transfer option. There’s a limited period option when you get 0% interest for 12 months. If you are disciplined and know how to make the best use of credit cards, this can be an option. Many people are not fully knowledgeable, that’s why they have maxed their credit.

• Contribute every dollar towards paying your debts: If you have figured out your spending habits, you should make sure that every penny that you save goes towards paying back your existing debts. I have seen many people saving some portion of money from their daily expenses and spending it on a weekend for a change. The result is zero. If your calculation shows that you have saved $200 in the current week, the same amount should go towards paying your bills and you should see the outstanding balance going down at the end of the month.

• Increase your overall income: There are many ways to find your sources of income. You must be having some quality and there are people who need some services that you can offer to them. Know your worth and find your hidden sources of income. Then, you might be seeing some junk in your garage that can be sold on ebay. It could involve doing some contract work or overtime at your job. I think that you can always find some extra hours in a week that can be used to make money. Cutting costs is obviously a good way to generate extra income, but you can always use your free time to increase that total income. After my regular job, I am able to do some extra work for which I can make $800 in a month. This makes a very big difference in my bottom line. If I had some existing debts, I would have definitely put it towards paying them back. Thank god, I don’t have any outstanding bills now. So, I can put a large portion from my regular income towards 403(b) plan.

• Opting for debt consolidation services: If you think you are unable to manage debts of your own then you should go for debt consolidation services. There are many debt consolidation companies available in the internet. Go with any of them but be sure you check about their reputation in the market. Check them in BBB whether there is any complain against them or not.

Being in debt is not a crime but it is a serious threat to your financial situation. And credit card debts are the worst of all. It’s very easy to fall into the debt trap and coming out of it is just as difficult or even harder. You need to have a discipline and a good balance on your existing life. Being debt free is a great feeling that makes all of that sacrifice well worth it.

This entry was posted on Tuesday, April 1st, 2008 at 6:56 pm and is filed under Debt. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.