Three Important Steps to Getting Out of Debt
This article from Get Rich Slowly outlines three big steps to get out of debt.
- Stop acquiring new debt.
- Establish an emergency fund.
- Implement a debt snowball.
These three steps may be over simplistic and easier said than done, but think of it as a framework or an overview of your plan to get out of debt. Think of each step as a goal and set a reasonable target date when and how you can accomplish them.
Stop acquiring new debt
This goal should be done immediately. Before you tackle your debt head on, you have stop growing it first. Cut up your credit cards if you have to.
Establish an emergency fund
This goal may take a few months up to two years. An emergency fund will help you stay clear of debt even when some unexpected setbacks arise. Do NOT rely on your credit cards for emergencies because it goes against the first goal of not acquiring into new debt.
Implement a debt snowball
Set an amount dedicated to paying loans in your monthly budget. If you are paying off several debts, pay the minimum amount required for all other debts except one. Put all your budget on this one debt and you will pay it off faster. Use this method to settle your debts one by one.
You can find the full article here.