60 Seconds: Guide to Getting out of Debt

Debt can be an overwhelming thing, but with these simple steps you can work your way out of financial despondency in almost no time!

It’s no fun being in debt. Fortunately, getting out of it requires just two things: common sense and patience.

You’ll need common sense to change the bad spending habit that led you into debt in the first place. And you’ll need patience because paying down your debt won’t happen quickly, not unless you win the lottery.

The first step to eliminating your debt is to commit to changing your negative spending habits. You must agree to not spend more than you make. If you can’t pay for something in cash today, you can’t afford to put it on your credit card. Following this rule will keep you from adding to your existing debt.

Next, it’s time to identify your bad debt and your good debt. OK debt is any debt that has an interest rate under 10 percent. This usually includes your mortgage and student loans. It often includes your auto loan. Bad debt is debt that has far higher interest rates. This most definitely includes your credit card debt, the worst debt of all.

Take your bad debts and add up the total minimum monthly required payments from all of them. Pledge to pay not only this minimum each month, but a significantly higher extra amount. Only by paying more than the monthly required minimum will you successfully pay down your outstanding debt.

When looking at your bad debts, pick the one that has the highest interest rate. Make every effort to pay that debt down as quickly as possible, even if you have other credit cards on which you owe a larger amount of money. Your goal is to pay down your high-interest-rate debt as quickly as you can.

Call your credit card issuers and ask for lower interest rates. You might be surprised at how often credit card companies are willing to lower rates on their cards. They do this because they want to keep you as a customer. They won’t make any money off you if you transfer your debt from their card to one with a lower interest rate.

Be careful when paying down your debt. It’s good to be aggressive when whacking away at credit card debt. But you have to be careful; you don’t want to spend so much money on cutting down your revolving debt that you accidentally shortchange the funds you need to make your mortgage payment or car payment.

Don’t be afraid, too, to vent about your debt problems on online message boards or forums. There are plenty of people out there in the same boat as you, struggling to pay down their debt. You can receive plenty of encouragement and some surprisingly good advice from these online forums. Just be careful to not give away too much personal information.

It’s important to realize, though, that you’re far from alone when it comes to struggling with credit card debt. According to surveys, there are a total of 181 million credit card holders in the United States in 2010. That’s up from 172 million in 2005 and 159 million in 2000. These cardholders held more than 1.4 billion credit cards in 2010. That number is actually down from the 1.48 billion credit cards that U.S. consumers held in 2005.

The outstanding credit card debt in the United States stood at $929 billion in 2010. That’s up from $962 billion in 2007 and $680 billion in 2000.

Other forms of debt have been rising steadily across the country, too. U.S. consumers owe more than $11 billion in mortgage debt in 2007. In 2006, this figure stood at just above $10 billion. In 2000, though, it stood at $5.1 billion.

Farm debt stood at $108 billion in 2007 and $94 billion in 2003.