how to get out of debt!

There's one certainty about debt that takes many people way too long to realize: you will never reach financial freedom until you face your debt head on! At the same time, there are certain types of debt that are more damaging than others. For example, student loans are not good, but they impact your finances differently than things like credit card debt. For starters, student loans can be considered good debt, since it's an investment in your future, assuming the education will help you get a better, higher-paying job down the road. With credit cards, you are not investing in anything. So while making on-time payments toward your student debt is crucial to avoid going delinquent, paying off the full debt immediately is not your first priority. 

When it comes to tackling your debt, it's important to prioritize which debts you pay off first, based on how they are impacting your financial life. With that said, credit card debt should be your first priority — it's bad debt that's damaging your credit and costing you a lot of money in interest!

When you're ready to start tackling your debt, there's one method that can help you get it paid off fast and that will cost you the least amount of money in the long run. It's called laddering. This is the best way to pay off high-interest debt like credit cards by allowing you to tackle the most expensive debts first! 

Follow these tips to start your journey toward becoming debt free!

Make a plan

• Depending on how much you owe, give yourself a timeline of 5 years or less — any longer can make it really difficult to stay on track.
• Reevaluate your budget so you can put as much money toward your debt as you can — while still setting aside money for savings.
• One general rule of thumb is for every $2 you put toward debt, put $1 into savings — until your high-interest debt is completely paid off.

Use the laddering method

• When it comes to paying off debt, you want to tackle your high-interest debt first, which typically means credit cards!
• If you have more than one credit card carrying a balance, start with the card that has the highest interest rate first — that one is costing you the most money.
• Put as much money as you can toward that card each month, while still paying the minimums on the other cards — and saving, too.
• When that card reaches a zero balance, then move on to the card with the next highest interest rate, and so on.
• Important note: any time you pay off a card in full, don’t close the account — that will hurt your credit score. Just let it sit at a balance of $0.

Use the calendar to speed up the process

• Instead of making one payment per month, try to make two — or more if you can. 
• Figure out how much you can spare per paycheck and make the payment immediately, before you have time to spend it.
• Try to pay as much as you can before the statement date, rather than the due date. This will help improve your credit score.

Get help from a legitimate source

• DO NOT get fooled by a debt settlement firm, they are just out to get your money.
• Contact the National Foundation for Credit Counseling (NFCC) at NFCC.org to find a local office near you. They offer free or low-cost debt counseling that can help you make a successful plan to get out of debt as fast as possible. You can get help getting your budget back on track and start making progress that you haven't been able to make up to this point.

Commit to making sacrifices

• Little expenses do add up over time — and interest can turn small expenses into huge debt.

• You have to learn to prioritize your spending — so those little expenses don’t prevent you from reaching your bigger goals.

• Putting off a vacation may suck — but to keep your money on track, sometimes you have to pick and choose, or maybe just tweak your plans.

Bottom line: figure out what’s important to you and keep those things in mind at all times. Making sacrifices now is worth the long-term benefits to your wallet and your life.

Find extra money to put toward debt

Paying off debt, while saving and paying your other bills, can be tough — so finding ways to both reduce your expenses and increase your monthly income can be a huge help. Any time you get some extra cash, maybe a bonus or a tax refund, throw it toward your debt!

Check out our budgeting guide to get your spending and saving back on track.