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Are you sick and tired of being in debt? Yeah, me too. I hate debt. That's why I decided to eliminate it and avoid it for the rest of my life.
So how exactly does one go about eliminating debt?
It can be a daunting task. Especially if you're in a situation like I was — at one point having over $50,000 of debt — but it is possible to get out of debt. And you can do it.
Here are 7 things you can do that will help you dump your debt.
1. Decide you're done with debt
If you aren't fully committed to stop using debt, it is going to be very difficult to get yourself out of debt. You have to change your mindset and completely overhaul the way you operate your personal finances. You cannot dig yourself out of a hole if you continue to dig out the bottom. Stop using debt, cut up your credit cards and start filling in that hole.
2. Get an emergency fund
Begin by setting aside a small emergency fund of about $1000 dollars. This will give you a little bit of cushion as you wean yourself off the credit cards. Having some money available for unexpected and unplanned events in your life will help keep you from running back to the plastic. It's not only an emergency fund, it's a security fund. It will help secure your personal financial life and give you the foundation you need to begin making some serious get-out-of-debt progress.
3. Use the budget
Budgeting is always going to be part of anything personal finance. It is the key to achieving all of your personal financial goals. Without budgeting, you won't get very far. Use the budget to minimize spending and track expenses. Squeeze every extra dollar possible out of your income. You might want to consider cutting your cable, reducing your internet or cell-phone plan, or avoiding restaurants until your debts are paid off. A good, detailed budget is the catapult to debt elimination.
4. Focus on one thing at a time
Doing too many things at once can dilute your get-out-of-debt progress. If you are trying to save, invest, give and eliminate debt all at the same time, you're going to struggle. Instead of doing a bunch of things all at once, focus on being excellent at one thing at a time. I would recommend not contributing to retirement while you are getting out of debt. I'm not saying to unplug your investments forever, but just for the interim while you get out of debt. If you're serious about eliminating debt, on average it should take about 24-48 months.
Think about it. . . What is the best way to get an 18 percent return on your money? Get rid of that 18 percent interest credit card. As soon as your debts are gone, you can restart your retirement, and you'll have a bunch more money to contribute.
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