There comes a point when people realize that they just have too much debt. This stage hits different people in different ways at different times. It truly depends on how comfortable someone is with having debt in the first place. I know people who charge up one card, and then go and quickly apply for a new card. The day the new card comes they are out shopping and putting more money on it. I know people who would not dream of using credit cards in that manner, but always buy expensive new cars. I know others that do not have any debt except for their student loans and mortgage. I know others who do not like to borrow money for any reason, and work like crazy to pay off their mortgage.
Unfortunately, many people do not feel the pressure to get out of debt until it becomes difficult to pay all the minimum monthly payments. When this happens, it can seem overwhelming to even pay the bills, let alone imagine yourselves completely out of debt. When you decide that you want to get out of debt you should begin by setting up a debt repayment plan. You can do so in four simple steps.
1) The first thing you need to do is list all of your debts, the amount you owe, the interest rate, and the minimum monthly payment. In this plan you should include all of your debts which would include old medical bills, and other bills that you may be overdue on (i.e. phone bills, electric bills).
2) The next step is to make a list of the order you are going to pay off your bills. The experts are split on how to make this list. Some experts believe that you should start with the smallest amount, pay it off, and then move to the next bill, because this helps to keep you motivated. Other experts believe that you should start with the highest interest rate, because this will save you money. I, personally, would go from smallest to largest, because of the motivation factor. You would then list the debts from smallest to largest. If you choose to do it from highest to lowest interest rate, then you would list it this way. I would definitely keep your home mortgage at the end of the list though, because the payoff time for most people is quite long.
3) You need to find extra money in your budget and you need to stop putting money on your credit cards. This may seem difficult but you can do it. It may mean cutting back on the clothes that you buy, or the number of times that you eat out. You may need to find ways to save money at the grocery store, or alternate ways to travel places. It may mean finding free or inexpensive forms of entertainment. You will take this money to apply to your debt repayment plan.
4) You should then pay minimum payments on all the debt, except for the first debt on your list. You will take all the extra money, and pay it towards the first debt on your list. If there is money leftover you should pay it to the next debt. You will continue doing this, crossing off your debts as you go, until you have paid everything off.