Simon’s Notes

In ‘Get Out of Debt - Part 1‘ I spoke about the importance of getting rid of any debt you might have before taking on any investments. That’s all very good and well but that still leaves the question of how do you go about getting out of the debt in the first place.

When you think about it, getting out of debt is not really that complicated. It basically boils down to having 2 things, a solid plan, and a solid commitment to that plan. If you don’t sit down for a few hours and work out exactly what your debt consolidation strategy will be, you will find it a lot harder than if you do. So pull out the notebook and pen and get ready to get down to some serious planning.

I can’t speak from personal experience since I’ve never really been in debt, but I can tell you what I might do if I ever found myself in a debt situation.

• Spend a good amount of time drawing up a complete debt consolidation plan. You might consider things such as who you owe (car, house, credit card, etc), you’ll want to know exactly how much you owe to each creditor, what’s the interest rate, how long you have left on each payment, etc.
• Make small goals first. If you’re paying off 2 credit cards, decide that you will put extra into one card till its completely debt free and then you’ll have more to pour into the second one. Or if you’re paying off a house, commit to putting in a little extra every month even if its only a few hundred dollars.
• Look for areas that you can cut back on. Are you still going to the movies? Are you a bit of an erratic spender when you’re out? Do you enjoy your expensive meals? Do you drive up and down from work every day? Why not look into carpooling, or taking the bus. Do you spoil your girlfriend/boyfriend too much? Do you have a weakness for chocolate? A friend of mine once suggested that I cut out a meal, which would help me in more ways than one :)). Take all that extra money and pour it into the debt.
• If you’re paying off a number of credit card’s, cut them up as you pay them. There isn’t really a reason why you should have more than 1 credit card.
• Plan your shopping, and stick to your plan. 40% of what we buy in the supermarket is impulse items, things like chocolate, candy, soda, magazines, things which are neither on our list or even healthy for us. Change your habits and cut out all this excess and pour it into your debt.
• What can you sell? What’s in your garage? Check it out and have a big garage sell. Do you have 2 cars when you only really need one? Get rid of whatever you don’t need, you might be pleasantly surprised to find out that you’ve paid your debt and have some to spare.
• Cancel any saving or investment plans you might have and use them to pay off the debt.

Of course once you get out of debt, make sure that things stay that way. Cut up all your credit cards except one, don’t spend money on impulses, use cash whenever possible, and most importantly, plan your finances well.

Simon

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Filed under: Money and Finances by Simon Rodrigues