Get Out and Stay Out of Debt

It is not always a lack of money that creates financial pressure. Many times it is simply a matter of attitude. It's the use of money and the attitude toward money that is the problem when overspending. There are many ways to get into debt but only one sure way to get out and stay out of debt: self-discipline. Regardless of income, disciplined debt elimination is mandatory in order for a money management plan to work effectively.

1. Allow no more debt
   Don't use any more credit or credit cards until all existing debt has been paid. Pay with cash, check, or debit card at the time of purchase. Don't borrow any more money from institutions, family, or friends until all indebtedness (home mortgage excepted) has been satisfied.
2. Develop a realistic budget
   You will need a written budget that allocates percentages of Net Spendable Income into living expense categories including repayment of creditors.
   If you need to generate extra funds by working overtime or on an extra job, all money generated by the extra work must go to eliminate the debt for this to be effective.
3. Retire the debt
   Pay extra on the debts with the highest interest rates. If all interest rates are comparable, begin paying extra on the smallest balance. After that debt has been paid, apply the regular payment as well as the extra money that was going to it toward the next highest balance. After the second is paid off, then the third highest and so forth

Generally speaking, if these steps are followed, the average family will be debt free in less than three years and the problem that caused the debt in the first place could very well have been corrected.

In order to stay out of debt, two steps need to be followed.

1. Develop a written plan of all expenditures in order of importance. Determine whether the expenditure or purchase is a need (basic necessities such as food, clothing, and housing), a want (things that make life easier, such as more expensive clothes, a VCR, or air conditioning), or a desire (more expensive wants, such as designer clothes, a new BMW, or a wide-screen TV).
2. Open a savings account and get in the habit of putting something into the savings account regularly, perhaps every week or every month. The amount of deposit is not nearly as important as the consistency in making a deposit. This savings can then be used for specific purchases or emergencies, rather than making these purchases on credit.

Avoid indulgence
Unfortunately; most consumers in America are self-indulger's, rarely passing up a want or a desire, much less a need. To achieve financial freedom, indulgences and the tendency to spend more than what can be afforded on things that are not needed must be avoided.
Avoid snap decisions
Avoid impulse spending, get-rich-quick schemes, and other financial decisions made through intimidation. Consider each decision carefully, especially if the decision will affect the family's financial welfare.