10 Steps to Climb out of Debt - You Can Make a Successful Financial Recovery

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Pay Off High Interest Lines of Credit Systematically

Some people like to start paying down the smallest line of credit so that they can see progress. This is a good approach. However, an even better approach from a number-crunching standpoint is to pay off your highest interest rate lines of credit first and then progress down the line to the debt with the lowest interest rate.


Set Goals

Set reasonable goals and use these goals as checkpoints to your final financial destination. For instance, good short-term goals include getting rid of your highest interest credit card or reducing your debt by $1,000.


Track and Categorize Daily Expenses

In most cases, the big items (e.g., television, appliances, computer, etc.) are not what get people into trouble. Rather, excessive spending on small items causes many people financial trouble. Take steps to track the little expenses that add up. You can use computer software such as Quicken or MS Money to track your spending in various categories on a day-to-day, week-to-week, and month-to-month basis.


Cut Spending

There are several ways to cut spending. For example, you can stop buying new clothes and you can trim grocery bills by doing things such as cutting coupons and buying ground meat over steak. Your apartment/house is likely your most costly expense. Decrease housing expenses by looking at options such as downsizing, taking in a roommate, or moving in with a friend or family member for a while.


Budget & Save

Adding money to an emergency savings fund is a must, especially in crazy economic times. Whatever amount you decide to set aside, put that amount of money away every month, no matter what. Treat this savings obligation like you are paying a bill, but instead, you will be paying yourself.


Take a Second Job

Everyone's financial equation has two ends: (i) expenses; and (ii) income. Taking on a second job battles debt from both ends of the equation - by cutting expenses and increasing income.


Pay Bills Online

Avoid late payment fees by making your bill payments online. Most banks with online bill pay allow you to set up recurring payments for those debts that remain the same each month. Paying your bills on time will help increase your credit score. Online bill payments services will help achieve the goal of increasing your credit score.


Fix Credit Report Errors

It is important to regularly check your credit report for errors and take the proper steps to remedy credit-reporting errors. Everyone is entitled to receive a free credit report annual from each of the three reporting agencies - Experian, Equifax, and TransUnion. You can obtain a copy of your free report annual at www.AnnualCreditReport.com. Keep in mind that the free annual credit report does not include your credit score; you will have to purchase your score separately from each of the reporting bureaus.


Find Out Your Credit Score

A good credit score is essential to acquiring new credit and obtaining the best interest rates. Credit scores range from the 300s to 850, with most people falling into the 600s and 700s. Strive for a score of at least 720 to 740 to obtain the best rates on credit cards, car loans, and mortgages.


Periodically Check Your Finanicial Situation

In addition to the steps highlighted about, you should assess your financial situation regularly to make sure that you are on track with your goals. Getting out of debt is possible, but it takes a lot of patience and discipline.

Additional Resources

Vincent A. Gorski, Esq.

The Gorski Firm, APC

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