How To Clear Debt: Find The Right Solution For You To Clear Your Debt
How To Clear Debt Part One
When you want to know how to clear debt you first have to know where you are.
Many authorities will tell you that you cannot clear out your debt unless you know your current situation. You have to know how much debt you have and exactly what your monthly payments are. You need to have an accurate assessment of your current reality.
How To Clear Debt – The First Step
How To Clear Debt
The first step is to create lists of everything you are paying each month. This would include your creditors and other items you buy. You want to end up with these lists.
- Monthly payments to creditors
- Non-monthly payments to creditors
- Other monthly expenses
How can you do this? Here’s the first step of how to clear debt. Create your three lists.
Create Your Monthly Payments Lists
The easiest way to find out what you have for debts is to look at your checking account, or the bank account you use to pay your creditors. Make a list of all your creditors that show up on the bank statement for last month. Every person or business you pay where you don’t pay the full amount of the bill becomes a creditor. This person or business will be listed either in the Monthly Payments or Non-Monthly Payments list.
If you make payments to this person or business every month, put them in the Monthly Payments list. If you pay only pay every other month or only a few times a year, then put that person or business in the Non-Monthly list.
Any payment you have that pays the full amount of the bill you received goes into the Other Monthly Expenses list of how to clear debt.
To complete the Non-Monthly Payments list you need to look at previous month’s bank statements. It’s best if you can go back a whole year to make sure you find payments you only make once a year.
Add Your Credit Balances
When you have your lists of creditors, find your monthly statements for each one and add your current outstanding balance to each of these creditors.
Now you’re in a position to add up the monthly payments and the current balances in each list. When you have done that you have your monthly out-go picture. You know how much you need to pay each month and how much you owe in total to all your creditors.
If you use a computer, you could make your lists in a spreadsheet format to make it easy to add up the amounts. If you don’t use a computer, you’ll need to add them with a calculator to get the totals.
How To Clear Debt – The Second Step
Once you have your three lists you have half of your current debt picture. The second half is your income picture.
If you are an employee, take your pay stubs from the last month and add them up to get a monthly total of how much money you have coming in. If you receive any additional income from any other work you do add that amount in also.
Now you can compare what you need to pay each month with how much money you have coming in each month. Now you will know whether you are gaining or losing each month you make your monthly payments.
Simple Ways Of How To Clear Debt
There are only three things you can do to clear debt. You can either
- Increase your income
- Reduce your expenses, or
- Combine them by increasing income and reducing expenses.
It’s really that simple.
First look at what you have spent in the last month. How many things can you do without or do less. Cut down what you spend. Get down to the things that you really need regularly. But if at all possible leave something in for recreation, because everyone needs a little something that is fun in their life.
Second look at what you could do that would bring in more money each month. Think of things that you might create for someone that they would be willing to pay you for. Think of things that you could do for someone that they would pay you for. In simple terms that’s creating products or services that the market values.
One Way How To Clear Debt Is Reduce Your Monthly Payments
Contact your creditors to see whether they will allow you to make lower monthly payments. If you have many credit cards as part of your monthly payments, you could use the strategy explained in The Fastest Way To Debt Freedom to get a reduction in your monthly payments.
If you have other types of creditors, check with them to see whether you can make an agreement to make lower monthly payments. This might work for mortgage loans or other secured types of debt.
Another Way How To Clear Debt Is Increase Your Monthly income
Think about how you could start your own business to generate additional monthly income. Many people have started a business selling items on eBay®. They find something that people are looking for and list it on eBay® for sale. They get paid for their efforts.
There are other services on-line that offer things to sell. You could be one of the people who sells the item for them and get an affiliate commission for selling it. One such listing of products is ClickBank. They have many items you could sell and get paid to do it.
Is there something that you know how to do that many people don’t? You could sell that as a service to everyone who would like to know how to do it. That would generate additional income.
As a last resort you could look for a second job that you could work part time to generate income.
How To Clear Debt Part Two
The second part of how to clear debt is keeping track of your income and expense. In the first part you created a list of all your income and expenses each month. Now to make those lists work for you, you have to be able to keep track of what you are spending regularly.
Track Your Monthly Spending
The Best way to accomplish this is to keep an ongoing list of your expenses every month. You can do this manually, but it is much easier using a computer.
Most people refer to this process as making a budget. But it’s better to think of it as creating a Debt Freedom Plan. Your Debt Freedom Plan contains what you plan to spend each month and what you actually spend each month. With this information you can see whether you are living according to your plan or not.
Using a computer to keep track of this plan is easy when you put your plan into a spreadsheet or use a software program like Intuit’s Quicken®. Then you know where you are at all times and can track your progress in your personal plan of how to clear debt.
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