10 Tips to Get Out of Debt

While the economy begins on a slow path to recovery, the amount of people throughout the United States who find themselves in debt continues to rise. For some, job layoffs and unforeseen external factors have created the situation. For most, however, debt is the result of extraneous spending, poor money management or both.

Here are ten tips to getting out of debt. Some are easier to follow than others, but all are designed to help alleviate the problem.

1. Create a realistic monthly budget for your expenses. List all monthly bills and necessities and make sure they are covered by your monthly income. Allow only the money remaining after the bills are paid to be spent elsewhere. Stay within your budget guidelines.

2. Pay off the balance on the credit card with the highest interest rate first. Then, get rid of the credit card and next month do the same with the card that has the next highest interest rates. Continue until you reach the credit card with the most favorable terms (i.e., low interest rates) and keep that one only.

3. Learn to use cash instead of credit cards. Have one credit card and use it only for emergencies or major necessities, such as a new refrigerator if the current one stops working. Put your credit card in a safe place, not available for everyday use. Also, do not accept increases on your credit card limit.

4. Use direct deposit for your paychecks. Also have a limit on how much you will allow yourself to withdraw each week and month.

5. Cut down on your discretionary expenses. This includes dining out, overusing your cell phone and other such unnecessary expenses.

6. Evaluate your living situation. Your housing costs should be no more than 33 percent of your household income, including mortgage payments, property tax and both property and homeowners insurance. You can shop around for lower insurance rates, refinance your home mortgage and look for more economical utility plans.

7. Avoid borrowing money to get out of debt, especially consolidation loans. Many people think this is a way of helping them get out of debt. However, consolidation loans are simply a means of combining debt. You could end up losing everything because you've tied it all up in one loan. If you must borrow, see if a friend or family member can lend you money, since the interest rates should be low or non-existent.

8. Contact your creditors and try to work out repayment plans. Many creditors are willing to work with you in a manner that will help them get their money without having to resort to debt collectors.

9. Become a savvy shopper. Look for deals, bargains and savings. You'd be surprised at how much you can save if you take the time to shop around. Check out the price comparison Web sites, such as AllBusiness.com, Shopping.com and BizRate.com.

10. Look for extra ways to make some money. From part-time work to a garage sale to taking in a border, there are many ways to bring in some additional income.

If all else fails, seek out help from a debt reduction specialist or counselors who can help you formulate a plan for getting out of debt and staying out. Just make sure that you check out the service in advance. Many companies are simply taking advantage of people in debt and charging them high service charges.

Find more advice on and at AllBusiness.com. AllBusiness provides practical information and services for business professionals and growing businesses.