Six Steps for Getting Out of Debt

Step One
Find out where you are in debt. Do you owe many businesses or just one or two? Look closely at your credit card invoices and loan agreements. Are you being penalized for not paying the total amount? Find out what happens if you are late or miss a payment. If you’re not sure, call your lender and ask.

Step Two
If you are in debt to just a few businesses, call them and try to negotiate smaller payments—at least for a while. Make this call before you miss a payment. It may be tough to do and embarrassing. Still, it’s better than getting calls from creditors demanding payment.

Step Three
If you owe money to many businesses, it may be time for outside help. Consider working with a nonprofit debt counseling service. The National Foundation for Credit Counseling is one service you can contact. Its toll-free number is 1-800-388-2227. The organization can work with you and your creditors to set up a repayment plan.

Step Four
Take a hard look at your spending plan. Try to come up with new ways to cut expenses. Can you use the bus instead of driving? Can you take a brown-bag lunch to work? Are there community services you can use for low-cost food or clothing?

Step Five
Look for ways to increase your income. Maybe another family member can contribute financially. Or, you can work extra hours at your job. Have you considered a second, part-time job? If you can increase your income so it’s more than expenses, you CAN get out of debt.

Step Six
As hard as it is, don’t ignore bills and past-due notices. A poor credit record follows you for years. It can make it hard for you to buy a house, get a loan, and maybe even get a job.

Getting into debt is easy. Pulling yourself out can be harder; it takes time and commitment. But, taking steps to get out of debt is far less stressful than watching your debts grow. In time, you’ll see that by having less debt you have greater choices. You will have more money to put into savings for the things that are really important: a good home in a safe neighborhood or a high-quality education.