1. Make a conscious decision to stop borrowing money
If you want to get out of debt fast, you have to stop using debt to fund your lifestyle. This means no more financing furniture, no more signing up for credit cards.
2. Establish a starter Emergency Fund of $1000
You might be wondering, ‘Why is having an emergency fund important’? Well, if you don’t have any money in the bank and an emergency does happen, how are you going to pay for it?
3. Create a realistic budget and stick to it
Developing a budget that tracks your income and your expenses is crucial to getting out of debt in a short period of time. The first way is to earn some extra cash. The second thing that you can do is trim your expenses.
4. Organise your debt
This is paramount to mapping out a plan to pay off your debt. There are two approaches that are worth considering. The first is where you list your debts smallest to largest regardless of the interest rate.
The other method is called laddering. This is where you list your debts, starting with the highest interest rate first and end with the debt with the lowest interest rate. This method makes the most mathematical sense, because you will save the most money in interest over time. Regardless of which process you choose, the key is to stick with it.
5. Throw any excess cash at your debt
Some good examples would be a tax refund, selling a car, an inheritance, winning a bet, etc. The more cash you can put towards your debt, the faster it will disappear.
Debt doesn’t have to be forever. Develop your financial game plan and start your journey toward being debt-free today.
Source: Clark Howard