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7 Steps To Dig Your Way Out of Debt

By: Steve Johnson

7/15/2009 - 103 Comments

The only good news about being up to your eyeballs in debt is that the coming inflation will reduce the burden of debt.

Everything else about debt is bad news and the sooner you get out of debt the better.

I usually don’t write much about debt because I’m not in debt and therefore I don’t have a lot of stories to write about how I’m getting out of debt. Some of the best stories about debt are written by personal finance bloggers that are going through the process of getting out of debt.

The reason that I’m not in debt is because I cannot stand it.  I avoid debt like it’s a plague that could kill me.  The only time I dipped my toes into debt was when I attended collage ten years ago and I got out as fast as I could. 

If I was in debt, this is how I would get out.

1: Identify how deep of a hole you’re in

The first thing to do is to take a realistic look at how much money to owe and what are the terms of each loan, including who you owe the money to. 

The best way to do that is to create a list of debts with details about each one including terms like interest rates, monthly payments and length of each loan. 

2: Create a short-term plan to get a handle on the situation

If the situation is out of control and you are in a downward spiral, then you need to act quickly to get a handle on the situation before you end up in bankruptcy count.  More than likely, your plan will include liquidating unprofitable assets or branches of your business or lifestyle changes that are draining the most money from your pocket.

3: Find help from somewhere or someone

Find help from somewhere, talk to your bankers, your parents, your friends and God about how to get out of the situation.  Collect as many ideas as you can and be open about your financial situation so that you can get more practical, creative and useful ideas.

4: Take drastic action to jump start your way out

Take drastic actions to jump start your way out of the situation. Before you even get started, set your mind on making desperate changes that could have major impacts on your life – at least in the short term - in order to one day get back to a stable financial foundation that you can rebuild on top of.  Realize that your finances cannot be built on sand and you need to rebuild the foundation before you can rebuild your house.

5: Invest in a new education and change your mind

Invest in a new education by realizing that your old financial education is obviously wrong and begin re-educating yourself about the changing economy and come to the understanding that the boom is not likely to return anytime soon. 

Read new books and new ideas about how the economy may change and stop reading and listening to the main stream financial media with economists that didn't see the recession coming. They are clueless. There lack of understanding about how the econonmy got into the mess cannot lead us out. 

Start reading Peter Schiff, Ron Paul and Thomas Woods to get a new education about what realy happen and what is in store for the future.  

6: Adapt your lifestyle to fit your plan

Change your lifestyle to fit the new economy, based on real consumer demand.  If business sales are down 40% or your wages are down 30%, then consider that you’re new level of income to adjust your budget to. 

Get your expenses well under your adjusted income and if your income has not been adjusted down yet, save even more so that you are prepared for a downward adjustment.  Look at your debt list everyday and create a schedule to pay off each debt – one at a one.

7: Count your money every week

Every financial successful person that I have read about or know counts their money regularly.  It doesn’t matter if you calculate your net worth or balance your checkbook or tally your assets versus liabilities – the act of counting your money on a daily or weekly base – makes you conscious of where your money is going, which leads to increasing your money. 

If you are new to counting your money, I suggest you start counting on a daily bases and after some time moving to a system of counting your money on a weekly based.  Money is moving all the time and it takes a lot of planning and creative thinking to find ways to tally your money and to know without a doubt how much money you have at any given day.  Longer than a week become too long to keep track of how money is coming and going.  Even the billionaires make counting their money on a regular base a priority.

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