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If you are to manage your money effectively, this is job one. You must get rid of any debt you have.
So, how do you do it?
First, stop spending more than you have! Second, develop a good plan. One of the mottos that I live
by is “Plan your work; work your plan.” Without a plan, it’s difficult to succeed. If you don’t execute
that plan, then the plan is worthless. OK, I’ll get off my soapbox now.
What steps should you take to get out of debt?
1. As I said above, immediately stop spending more than you have.
2. Stop using your credit card. Use only cash and debit cards.
3. Keep one credit card in your wallet (the one with the lowest interest rate) for emergency
purposes, and throw away the rest of them. True emergencies occur once every couple
of months (at the most).
4. Tally up your debt. Determine exactly how much you owe and to whom and the interest
rates you are paying. It’s important to note (a) smallest to largest debts and (b) the
interest rates you’re paying on each debt.
5. Make a long-term plan that pays off all of your debts within a specified amount of time.
Include what you will be spending less on. Look closely at your spending habits and
cut/reduce all possible expenses to fund your debt elimination. Unfortunately, this may
mean some drastic cuts in key areas (e.g., housing). Make sure you stick to this plan.
6. Pay off the highest interest rates and smallest debts first (so you have some quick, easy
wins). It will make you feel better and will get you psychologically ready to pay off the
larger debts. It’s sort of like losing weight.
7. Pay at least the minimum due on all other debt.
8. Start paying off larger debts (again, those with the higher interest rates first).
9. Follow your plan until you’re debt free—and never get in debt again.
Focus all your energy on getting out of debt. Your reward is getting out of debt. It is not getting a new
computer or a new car. Once you are out of debt, you need to live by the principles espoused in this
Most experts give you some variation of the steps above but don’t tell you how difficult the steps are
to implement. I’m going to say something that you’re not going to like: It’s not easy to get out of debt.
You will have to make sacrifices.
The last few years have proven that Americans hate to make financial sacrifices. I will say it again: If
you are in debt, you do not have an option. You must make sacrifices.


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