Getting Out of Debt Fast

Get Out of Debt - Start the New Year Right

With the beginning of the new year, now is the perfect time to get your financial health in order. Your first step should be to get organized. Gather up all your financial documents such as bills, credit card statements, insurance records and create a filing system for your documents. Tracking your finances in an organized manner will allow you to see exactly how much debt you have and how much you are paying in interest on that debt. Getting out of debt takes a well informed, disciplined approach.

The next step you should take to get out of debt is write down all your income and every expense including credit card payments, doctor bills, cable TV, even the coffee that you stop and buy every morning. Make a chart or spreadsheet showing the creditor, the interest rate, monthly payments and the number of remaining payments for each debt.

You will want to pay off either the debt with the highest interest rate or the debt with the smallest balance. It will be easier to pay off the debt with the smallest balance first (ie., a $3,500 credit card debt versus a $20,000 home equity loan). Once the balance of your first debt is paid off, take the money you were using to make payments on that debt and start making extra payments on the next debt you wish to pay off. This will create a snowball effect and you will be able to get out of debt faster.

If you are feeling overwhelmed with debt or are not comfortable with developing a spreadsheet listing your income and expenses, consider meeting with a qualified financial planner, CPA or tax advisor to help you. Take advantage of free or low-cost credit counseling available through nonprofit groups, which offer help with credit card, mortgage and other debt issues. Getting out of debt won't be easy but it will be one of the best commitments you could make this year. Remember it took time to get into debt so it will take time to get out of debt.