gold dollar7 Steps To Pay Off Debt And Avoid Bankruptcy

Some people spend more money than they earn,then simply can't pay off debt.

For others, unemployment, medical expenses or divorce have put them in the fast lane to filing bankruptcy.

Do you know that one in every 100 families is affected by a bankruptcy?

Getting out of debt before hitting that slippery slope to filing bankruptcy should be a priority for anyone carrying debt.

Here is a 7 step guide to help you pay off debt.

1. Make a list of all your debts. Sort them by highest balance amounts. Prioritize your repayments. You can start by paying down the highest interest rate debt first or you can pay off debt that has the lowest balance outstanding.

2. Eliminate your credit card debt and stop rolling over balances each month. If you carry a balance from month to month, you’ll be paying interest on your interest. Once you have paid off the card, close the account.

3. Create a spending plan and stick to it. A smarter way to manage your money is using an online budgeting system that can track every aspect of your spending as it happens. You will always know exactly how much you have left to spend, instantly know the impact of every spending decision, effectively manage credit card spending, and quickly create an easy to use household budgeting plan.

4. Treat the equity in your home with care. Many have withdrawn their home equity to pay off debt, and then rack up more debts. If you have not made behavioral changes in your money management, you will be facing the dark cloud of bankruptcy, because you no longer have that safety net of home equity.

Sometimes when people pay off a substantial amount of debt all at once, it creates a false sense of wealth, and the debt is re-established within a year or two. If that has been your experience, pay off your credit card balances over time, allowing time to make behavioral changes.

5. If the habit of overspending is a psychological problem, get help. Spending can become a habit much like alcohol abuse, drugs or gambling. If circumstance such as loss of a job, divorce or medical bills has you in debt, get professional help to sort your issues.

Talk to a credit counselor or a financial advisor on a private basis. It will only appear on your credit report if you enter into a debt settlement or debt repayment program.

6. Stop carrying your credit card with you. This is the most powerful step to pay off debt and yet the most difficult thing to do. The most common concern expressed is, "I need it for emergencies." Ask yourself this: "When was the last time you needed a credit card for emergencies?" The average household has 10 credit cards.

7. Pay yourself first. The time to think about how you’ll pay for an emergency is BEFORE the emergency happens.

That’s why many financial advisors recommend you keep savings equal to at least three to six months of basic living expenses in an easily accessible, low-risk account like a savings account. (Check out The Orange Savings Account. Great rates, no fees, no minimums. )

How much money do you need every month just to get by?
Add up your fixed monthly expenses like rent or mortgage payments and utilities. Then add the amount you spend for food and other necessities. By averaging these expenses over a three-month period, you’ll know what amount you absolutely must have each month.

Following these 7 steps to pay off debt, you will experience a reduced level of stress and an optimistic outlook for a debt free future.

checkmark For more tips to help you pay off debt, check out the Debt Action Guide.

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To achieve financial freedom, ideas such as: listening to good advice, learning how to make a budget, understanding credit repair possibilities, avoiding the scams, and generally becoming more knowledgeable of the credit card business, can all play a role in eliminating credit card and other debt. There is A smarter way to manage your money.


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