Debt truly is the worst four-letter word in the financial
world. Once you get into debt, it can constantly hang over your
life, causing constant anxiety. But debt doesn't have to dominate
your life. To help show you how to get out of debt, I've put
together five simple things you can do to
start paying off what you owe
, and get yourself on the path to financial independence.
1. Figure out what you really owe.
Many people think of debt in terms of how much they have to pay
to cover their minimum payments every month. But to get a true
handle on your debt, you have to know how much you owe in
Make a list of all your debts, with the total outstanding,
minimum payments, and current interest rates. You'll use that
list in future steps as a guide to deciding how to get your debt
2. Find savings wherever you can.
In tough times, the hardest thing to do is find ways to cut your
costs in order to save more. But whether it's clipping coupons,
cutting back on unnecessary expenses, or picking up extra work on
the side, dedicating every spare dollar in your budget toward
reducing your debt will get you out of debt as fast as
3. Apply any extra money toward paying down your
Once you've found that savings, go back to your list of debts and
figure out which ones carry the highest interest rates. For most
people, credit card debt will rise to the top of the list, as
Bank of America
have many cards that charge double-digit interest rates
right now. Banks count on those sky-high interest rates to help
finance delinquent accounts and earn substantial profits, but
that doesn't mean you should pay them any longer than you have
to. If you can double your monthly payments on just a single
card, you'll chop off well
half the time it'll take you to get that card paid off.
4. When you've paid off one debt, apply that money to
your next-highest-rate debt.
Getting that first card paid off can be slow going, but the nice
thing about this strategy is that when you're done paying that
card off, you'll have more money to pay down other debts. Once
you're done getting rid of all your credit card debt, you'll
likely move on to high-rate student loan debt, car payments, and
eventually, lower-rate student loans and mortgage debt.
5. Once you're done, don't stop saving.
When your debt is all gone, start paying
. Since you've gotten used to setting that money aside to get out
of debt, you shouldn't miss it when you start investing it toward
savings goals, such as having a rainy-day fund, building up a
down payment for a home, or saving for long-term needs like
retirement. Doing so will get you ahead
prevent you from falling back down the debt spiral at the first
sign of financial difficulties in the future.
Get started today
As simple as these steps are, it can take years to get through
them and eliminate your debt entirely. The key, though, is
staying confident that you
a plan, and that you
know how to get out of debt in the long run. Having that
confidence will help you get through the inevitable tough times,
and stay on course to a much more prosperous financial
Investing in the banks that reaped the benefits of
debt can be an excellent turnabout-investing opportunity. Find
out more about
whether JPMorgan is worth buying
in your investment portfolio by checking out The Motley Fool's
premium research report on the company.
Click here now
for instant access!
owns warrants on Bank of America and JPMorgan Chase. You can
follow him on Twitter @DanCaplinger. The Motley Fool owns shares
of Bank of America, Citigroup, and JPMorgan Chase. Try any of our
Foolish newsletter services free for 30 days. We Fools may not
all hold the same opinions, but we all believe that considering a
diverse range of insights makes us better investors. The Motley
Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights
reserved. The Motley Fool has a