Manual 10 EASY Steps to Getting Out of Debt in 6 Months

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How Debt Affects Your Credit Scores
  1. How to Get Out of Debt In Six Simple Steps
  2. How to Get Out of Debt in 12222: 7 Strategies That Work
  3. How to Retire Carefree

Getting to a positive net worth might be an initial goal, and you might also set a series of savings goals for arriving at what you need for retirement. First, though, you'll need to have your debt under control -- and, ideally, wiped out. Keep these goals handy and regularly reflect on them to assess whether you're making progress, and what behaviors are hindering your success. Your credit score is based on information in your credit report, and it plays a very influential role in your financial life.

A great score can get you the lowest interest rates for loans such as mortgages, and a poor score can cost you tens of thousands of dollars in extra interest paid because of a high interest rate. The following table shows the importance of a strong credit score, using homebuying as an example.

Many credit cards let you see your credit score online, and it can be helpful to be able to track it over time if you're working on paying off debt, as it will probably rise -- especially if you're paying bills on time, too. Here are the components of the widely used FICO score:.

How to Pay Off Debt: The Debt Snowball Method

It's also smart to get copies of your credit reports regularly, too, and to check them for errors. By law, we're all entitled to a free copy of your credit report annually from each of the three main credit agencies -- visit AnnualCreditReport. Fixing errors is one of many ways to increase your credit score. For best results when getting out of debt, you'll want to use one or more smart strategies, and to stick with them in a disciplined manner. Making extra payments against your principal without a plan is not an effective way to reduce debt and will probably draw the repayment process out for a long time.

This is an easy way to make the debt repayment process less painful if you're able to do it: Reduce your interest rates. Changing the interest rate on your mortgage requires refinancing -- but it might be worth looking into. One rule of thumb suggests that it's worth it if the interest rate you're likely to get is a percentage point lower than the one you have.

One issue many people with multiple debts face is deciding which debts to pay off first. There are two opposing schools of thought on the topic. One is the "snowball" approach, where you pay off your smallest debt first, so that you feel a sense of momentum building.

If, for example, you have a car loan and debt on five different credit cards, you might be able to quickly pay off two of the cards, leaving you with only four accounts to pay down instead of six. That can make it seem as if you're really making progress, and can be encouraging. The other approach is more efficient, though: Paying off your highest-interest-rate debts first.

Remember that you compiled a list of your debts and their interest rates. Well, the ones with the highest rates are costing you the most, over time. Another strategy can have you bypassing the decision about which debts to pay off first by consolidating your debts.

How to Get Out of Debt In Six Simple Steps

Depending on your debts, you may not be able to fold all debts into one, but you might bundle all your credit card debt onto one card, while consolidating various student loans into one. Some people take out home equity loans to get the money to pay off various debts. That can be effective if the home equity loan features a lower interest rate. If you use the money to pay off credit card debt but then proceed to rack up more credit card debt, it may not have been worth it.

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When it comes to student loan debt, you might consolidate federal student loans into one loan through the Department of Education's Direct Consolidation Loans. Also, or alternatively, you might take out a private loan to consolidate debts -- that's generally referred to as refinancing student loan debt. The advantages of consolidating can include lower monthly payments if you extend your payment period and getting out of default, while drawbacks can include less flexibility and a longer payback period -- which can mean more interest paid, overall.

That interest rate will be in effect for between six and 21 months, after which a more standard interest rate will apply. That standard rate will not necessarily be a great one, so you should seek cards that will charge you relatively low interest rate ranges following your teaser-rate period.

Aim to pay off your debt on your balance transfer card before the teaser rate ends -- and if you don't think you can, perhaps opt for a low-interest-rate card instead. Many times, you won't be able to know until you get approved for the card.

How to Get Out of Debt in 12222: 7 Strategies That Work

You won't be able to transfer more than that limit, less the balance transfer fee, if there is one, and if you exceed the limit you might face a fee. Find out if there's a penalty APR, too. Many cards don't feature them, and that's preferable. Remember that any time you apply for a new credit card, even for a balance transfer, your credit score may be affected negatively as a result. Dog walking is a lucrative side hustle you can do on your weekends. Image source: Getty Images.

The last strategy for getting out of debt is to simply avoid making more regrettable moves. I finally realized that no one was going to solve this problem for me. Nicole was smart: Rather than attempting a punitive overhaul of her spending patterns, she studied them carefully — even though some made her cringe — and then used them as a blueprint to work from.

How to Retire Carefree

To start, she downloaded a free budgeting tool she used EveryDollar , but there are many options and plugged in her expenses from the previous month. From then on, she kept meticulous records of every cent that came and went, entering numbers into the tool every couple of hours. The time commitment was significant — about 30 to 45 minutes a day — but it worked. These financial workouts, so to speak, not only helped Nicole adjust her budget as necessary if she bought new pants, she had to lower her allotment for groceries , but also made her more scrupulous about every dollar.

And anytime she ended up with extra change in one budget category, she would put it toward her credit card. And once she was making progress, she felt more equipped to set concrete goals: namely, how could she pay down her debt faster? Once she decluttered, she began hosting much cheaper dinners at home. Scrubbing her life of extraneous material things was more painless than she thought. In the meantime, she kept her best freelance clients, which meant she was working around the clock — and earning more than she ever had before.

She threw the kitchen sink at that one first, then moved on to the balance transfer card which would only be zero-interest for a limited time. Once those were done, she finished off the remainder of her medical bills, whose minimums she had been paying throughout.

These days, she still keeps one credit card, but pays it off immediately whenever she ever uses it. Do I need four kinds of blush?