Are your creditors calling you because you’ve missed, well, a few payments? Are those unopened envelopes on your desk credit card statements? Have you actually lost track of how much you owe your various lenders? Do you really want to get out of debt and get those creditors off your back?
Believe it or not, there’s a simple answer.
Just get organized and pay them off.
Sound too easy?
It really can be easy. But it all starts with getting your debts organized and facing up to them so you can get out of debt and enjoy some happy endings
Here’s a proven plan to get out of debt
Make a spreadsheet of what you owe
The best and easiest way to get your debts organized is by using a spreadsheet. If you don’t own one like Microsoft Excel, you could use Google Docs or OpenOffice.org. Both of these programs are free and include spreadsheet programs.
We suggest you organize your spreadsheet into five columns. The far left-hand column should be the name of your creditor, followed by the amount you owe, the minimum payment required, the day of the month your payment is due and if appropriate, the number of months you are behind in your payments.
There, that wasn’t so hard was it?
Now, sort your spreadsheet by your balances or the amounts you owe on your debts with least to most. You should end up with a list of your debts organized from the one with the lowest balance down to the one with the highest.
Make a budget
Okay, you now have your debts organized. Your next step is to make a budget. To do this you will need to track your spending for at least several weeks. This is much easier than you might think because there are a number of free apps available that can make this a breeze. We like Mint and DollarBird though there are many others available that will do the job. One of the reasons why we like Mint is because it will automatically organize your spending into appropriate categories such as clothing, entertainment, dining out, food, utilities, debt payments and so forth. Once you have this information in hand you should be able to find areas where you can make cuts. The objective here is to reduce your spending by at least 20% so that you will have more money available to get out of debt.
Go back to your spreadsheet
Go back to your debt spreadsheet and start paying down the debt with the lowest balance using the money you’ve freed up by reducing your spending. Once you’ve paid off that debt, you will have even more money available to begin paying down the debt with the second lowest balance and so on. People that owe as much as $20,000 have been able to pay it all off in just 27 months using this method. The financial expert Dave Ramsey, which he calls the snowball method of paying off debt, created it.
Hit the phone and negotiate with your creditors
You may also want to negotiate with some of your lenders to get concessions. As an example of this, you could contact your credit card companies and ask for a reduction in your interest rates or monthly payments or to skip your payments for a few months. While this might surprise you, credit card companies are often willing to work with you, especially if you need to catch up on your payments. They may not be willing to give you all the concessions you request but they should be willing to do something to help you get out of debt.
If you’re really in over your head
If you owe $7500 or more on unsecured debts like credit card debts, medical debts or personal loans and are a few months behind in your payments, there is another solution to get out of debt. It’s called debt settlement or debt negotiation and it’s something you could do yourself – if you have good negotiating skills and the cash on hand to pay off your settlements.
Most people are not so fortunate and choose to contract with a professional debt settlement company such as National Debt Relief. There are several advantages to this. For one thing, the professional debt counselors at companies like National Debt Relief are very skilled and are usually able to negotiate much better settlements then you would be able to yourself. Second, once you contract with a debt settlement company it will contact all of your creditors and order them to stop calling or harassing you. The same is true if you are being harassed by a debt collection agency.
Another advantage of debt settlement is that it is a form of debt consolidation. This is because once the company settles your debts you will be presented with a payment plan. Assuming you approve the payment plan you would then have just one payment to make a month and anywhere from two to four years to complete it, after which you would get out of debt and enjoy some happy endings.