Tips to Eliminate Debt

If debt is bogging you down and causing stress in your life, you’re not alone. The average American is more than $16,000 in debt, not including mortgages, according to PBS Newshour. The amount of debt has grown more than 20 percent from 2000 to 2008. However, it is possible to eliminate your debt by taking charge of your financial situation.

Create a Budget

The first step to getting out of debt is to stop creating debt. Make a budget by recording how much money you make versus how much you spend. Begin by listing your income, and then write down your fixed expenses -- the money you spend each month that does not change, such as mortgage or rent, car payments and insurance. Add the variable expenses, such as entertainment and clothing. This will help you track your spending patterns and differentiate between needs and wants. To get out of debt, you must continue to pay the needs and avoid the wants.

Debt Snowball Plan

Financial experts disagree on the best way to pay down debts. Some organizations recommend paying off the debt with the highest interest rate to avoid racking up even more debt through interest. However, financial expert Dave Ramsey recommends the “debt snowball plan,” which dictates paying the debt with the smallest balance first. When this debt is paid off, you’re likely to feel a sense of accomplishment, Ramsey says, which will lead you to pay off more debt.

Consolidate Your Debt

Instead of paying debt with high interest rates, transfer the balance to lower-rate cards. This will save money because you won’t have to pay those higher interest rates, which will lead to your debt being eliminated more quickly. Before you transfer, check out the fine print on the interest rate. Balance transfer rates often offer a low interest rate for a certain time period -- such as 0 percent APR for six months -- but then could jump up to a higher interest rate than you were originally paying. Either pay off the balance within that time period or keep the balance where it is.

Stop Using Your Credit Cards

You can't get out of debt until you stop adding to your debt. Take your credit cards out of your wallet and put them somewhere difficult for you to get to -- a safe or your spouse's wallet. Cancel extraneous credit cards so you won't be tempted to use them, and leave the others at home unless you actually need them so you won't spontaneously add to your debt. This might hurt your credit score, according to, so this should be a last-ditch effort to reduce your debt.

Negotiate Lower Rates

You can lower your interest rates just by calling your credit card company. The less interest you pay, the less time it will take you to emerge from debt. As long as you have been a good customer who has paid on time, the card company should seriously consider your request. Aim for an interest rate that is at least in the midteens; however if you have a solid credit history, ask for an even better rate, notes USA Today.

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