The path to becoming debt free (and ultimately – financial independence) can be a long one. Numerous factors along the way can derail even the most sincere attempts to rid yourself of that nagging debt. One of the most important steps to take is to rein in your debt, and here are the steps to take to do just that.
One of the first steps you should take is to prevent yourself from increasing the amount of debt you already have. Trying to eliminate debt while still using your credit cards will feel like shooting at a moving target, and end with your being frustrated and unsuccessful in your efforts. Destroy all but one or two of your credit cards to ensure that your debt doesn’t keep increasing as you’re trying to pay it off.
Second, you need to make a budget for yourself and your household. Trim away all unnecessary expenses, and limit the amount of money spent on frivolous things like restaurants, nights on the town, and vacations. This will absolutely require some sacrifice on your part, but will be well worth it when you have the satisfaction of being debt free. Settle on an amount that you can afford to consistently pay every month without going hungry, but aggressive enough to pay down the debt as fast as humanly possible. But make sure that the amount is reasonable and allows to you to still afford food, air, housing (you know the essentials in life). Along the way you may discover that living on less is actually more satisfying that you ever thought possible.
Finally, make a list of all of the loans, debts, and credit cards that you have. Rank them in order from highest interest rate to lowest interest rate. The credit cards/loans that have the highest interest rate are costing you the most money in interest, so the sooner you pay those off the better.
Now that you know the amount of money you can use every month to pay down the debts and know the priority of which debts to pay off first (as dictated by those with the highest rate), you can begin systematically paying them off. Make the minimum payment on all but the highest interest rate debt, and pay as much as you can on the one with the highest interest rate. As soon as the highest interest rate debt is paid off, put that money toward the next highest debt, and so on. This is the part that is going to take time and patience from you. Stay consistent with your budget and know that if you have a large amount of debt, it may take months and even years to eliminate it.
Hopefully enduring this painful process gives you the opportunity to examine your spending habits and re-prioritize things in your life important to you. Ensure that you never have to go through this process again, and keep your debt at a manageable level in the future.