Permanent Debt Elimination Strategies

The best way to eliminate debt is to develop a getting out of debt plan that can be stuck to. Getting out of debt and staying out of debt requires patience, budgeting, and a more frugal lifestyle.
Permanent Debt Elimination Strategies

Personal Money Management Chart

A simple chart displaying the difference between income and expenses clarifies a person's financial status. At the top of the chart is net income. (Net income is the amount of money a person brings home after taxes.) Under this number the monthly expenses are listed. Expenses are both fixed and flexible.

Fixed expenses are non-negotiable, for example:

  • Mortgage or rent
  • Telephone
  • Car payment
  • Town taxes for sewer and water.

People have more control over their flexible expenses, for example:

  • Energy bills can be lowered by conserving energy in home
  • Grocery bills can be lowered by buying generic.

A personal money chart shows where money goes and how much (if any) is left over.

Consolidate Credit Cards

Credit card payments fall into the category of fixed expenses, but consolidating credit card debt and making one-time or infrequent debt negotiations with the company are helpful in lowering debt and getting out of debt.

  • Stop using credit cards.
  • Call the credit card companies and ask to have the APR lowered.
  • Ask to transfer a balance from one card to one with a lower interest rate, and ask to have the transfer balance fee waived. (Make sure transferred balances are not subject to a higher interest rate.)

Credit card consolidation may not lower the monthly payment amount, but it will lower the interest on the loans and help cardholders get out of debt faster.

Lower Bills and a Frugal Lifestyle

An honest personal money management chart shows all expenses and how much they are. In order to free up money to reduce debt, sometimes difficult choices are made. The choices and answers to questions are different for each individual. A person who is new to frugality but is looking to pay off their debt should evaluate the following:

  • Cable bill, is it necessary? Also, other home entertainment services should be evaluated, such as Netflix.
  • Home internet service. Some people require it, others choose to use the computers at the library or at work.
  • Dining out. It is less expensive to pack a lunch on a workday. This will make a difference in the budget even if only done once or twice a week.
  • Energy bill. Is it possible to lower energy consumption in the home? Simple strategies include turning off lights and other electrical appliances when not in use. Unplugging appliances such as televisions and coffee makers, when not in use, actually saves more money than just turning them off.
  • Telephone bill. Some people choose to ditch the land line and just use a cell phone.
  • Car. Depending upon where a person lives, a car may be a necessity. However, it is worth evaluating whether or not driving to a certain destination is necessary (perhaps walking or biking would do) and less use of the car means less gas and car maintenance expenses.
  • Air conditioner. Is it necessary? Will fans be enough?
  • Brand new clothing. Is it necessary? Is there a good quality┬áresale clothing store in the area?

These suggestions represent the tip of the iceberg. Anywhere a person can shave money off of or eliminate a bill, it frees up money to pay off debt.

Slowly, over time, as the amount of debt owed reduces, the left over funds can be funneled to the debt resulting in getting out of debt faster.

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