Getting out of debt can sometimes seem like an impossible dream, but it can be done. It does require some specific action steps from you, and possibly your household. You’ll find 5 simple steps to destroying your debt in the article below. You can also learn more from the websites of debt counselling agencies, like Debt Rescue, and most of this information is freely available online.

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Stop!

In the name of debt destruction, stop incurring more debt. If you are carrying paid down credit cards you hardly ever use – cancel them and cut them up (you heard!). Consider using only a debit card – that way, once you’ve spent what’s on the card, you’re done. These cards do not allow you to draw on money that isn’t there, and you won’t have any interest bills to pay.

Track!

Track your spending for an entire pay cycle. You can’t possibly make a difference to your outgoings (and therefore your debt levels) if you don’t know exactly where your money is going. There are apps for that now, and if that doesn’t work you can always use post it notes and a pencil – it may be old fashioned but at least you’re not dependent on your phone signal. Try to be as thorough as possible. Don’t forget to note any and all cash purchases as well. You might be surprised at how quickly a few bottles of water a week can add up. Remember that some bills are only annual or quarterly, so ensure these are accounted for.

Classify!

Once you have a very clear idea of how you spend your money, divide all your costs up into categories. This will help you to identify what is discretionary, and what is essential (the new iPhone, by the way, is the former). It will also help you see where you can make the most impact in reducing your outgoings. It’s usually in the discretionary pile, and comes from the categories like ‘Entertainment’ or ‘Grooming’ (i.e. clothes and shoes).

Budget!

There it is – you knew it was coming, didn’t you? There is no way to plan finances intelligently without a budget, so you may as well get used to the word. Once you have drawn up your budget, you’ll be able to see what, if any, money is left over. This is good news for Mission: Debt Destruction.

Battle Plan Time!

Organise your debts – get hold of every credit contract you’re dealing with and get started. Make a list of how much you owe, to whom, and what the interest rates and terms are (including any early payment penalties). Now, putting it all together, you can decide who to pay first. Start with any credit cards with high interest rates – and then get rid of them. Keep making the same savings and funnel this money into the next largest debt and/or one with the highest interest rate – and so on and so forth until your debts are under control and you are channelling all your spare cash into your mortgage and savings or investments. You’ll find with each released debt, more funds will free up so have a plan for each additional bit of money, or it will just get frittered away.

Getting out from under the debt pile isn’t easy but it can be done. It requires some confrontational honesty, a good plan, and a lot of discipline. With these ingredients in play, you won’t ever need to face the debt nightmare again. Do you have any powerful debt destruction tips? Let others’ know in the comments box below.