Want to Get Out of Debt? Stop Digging the Hole!

One of the most difficult aspects of getting out of debt is to stop digging the hole.

It’s a nice thought that you are going to put so much toward your credit cards each month, but it doesn’t matter how much you are paying down on one card if you are racking up debt on another card.

Even worse is when you get a balance transfer and then start building a new balance on your recently freed-up card.  It kind of defeats the purpose really and puts you in a dangerous place if you got a low-interest transfer and the introductory period is ending.

If you are really serious about getting out of debt, you need to stop digging in the hole.

Stop Debt Spending

The first thing that you need to do if you want to be successful at getting out of debt is to stop your debt spending.

Take an honest look at your finances.  Have you been spending beyond your means?  Even if you only exceed your income by $10 a month, that’s an issue.  Yes, even $10, in this case, is putting you in debt and odds are that debt is accruing interest putting you deeper in debt.  You need to first identify where you are living beyond your means — and stop that spending.

Start out by listing all of your expenditures.

If you really want to find where your spending might be causing you to overrun your income, look back two or three months.  You can likely get copies of your bank statements online, or use your personal finance software to generate a report.  Find trends in your spending, and identify expenses that aren’t necessary.

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Remember we’re being honest here.  You can’t tell me there isn’t anything to cut out of your spending.

Financial experts estimate that the average household wastes 10% to 15% of its income each month.  There is a reasonably good chance that some of that waste is contributing to your debt problem.  You need to find this waste, and then eliminate it from your spending.  This means that you will need to make a budget or spending plan — and stick with it.

Once you know where your spending weaknesses are, you need to make a plan to help you spend more wisely, and stop spending on things you don’t need.

This can be painful, and you may need to cut back over the course of a couple of months.  Look for ways to cut back on your spending, or make more money.  You need to offset the amount by which you exceed your income each month in order to be successful.

Your Habits Have to Change to Find Permanent Success

If you want permanent success with your debt pay down, you need to change your habits.  You need to turn your poor habits into good habits.

Even if you go extreme for seven or eight months, and pay off your debt, if you aren’t making fundamental changes in the way you deal with money, there’s a good chance you will end up back in debt.  It’s just like going on a diet for a few weeks and you lose a few pounds.  It’s all for naught if you revert back to eating junk.  You need to change your habits.

The first step to permanent debt free living is to change your mindset so that you don’t tolerate debt spending.  Then you can start building up an emergency fund to avoid the temptation of using credit cards for emergencies.

And then you can begin actually paying off your credit card debt and moving toward a debt free life.



Published or updated June 3, 2013.

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