Image Courtesy: Glasto 2009

Getting out of debt is not an easy process. It won't happen overnight and it takes a great deal of patience.

Each time I am faced with something that seems like it will impossible to do, I always remember a little saying I've heard. It goes "
How do you eat an elephant? One bite at a time".

It may seem really hard but if you take it one step at a time, you will get rid of the debt that is holding you back and hindering your financial life.

How do you start getting out of debt?

1. Make a budget
. You need to know where every penny of your money is going. Once you know where your money is going each month, you can find areas where you can cut back. The money you were wasting in those areas can then be used towards debt reduction. If you aren't sure how to get started with a budget, check out Mvelopes to get some tips. There is a small fee to use the service but you can use it for 30 days for free to get some ideas of how to create a budget.

2. Increase Income
. If you are saying that you can't find the extra money to apply towards debt, it may be time to look for additional income. Can you pick up a second job? Can you work overtime at your current job? How about looking around the house and getting rid of those things you don't need. Do you have a stack of CD's and DVD's sitting around collecting dust? Get rid of them and apply the cash towards your debt. Better yet, stop buying DVD's, get rid of cable and rent them from Netflix or Blockbuster instead.

3. Eliminate Temptation
. Assuming you have multiple credit and/or store cards, take all but one credit card out of your purse or wallet. The one card you keep should only be for an emergency and I would recommend keeping the card with the smallest credit limit. The credit cards should be frozen and the store credit cards should be destroyed.

4. Use Windfalls Wisely
. If you are one that gets a large tax refund from the government each year, you should use that money strictly towards reducing your debt. Better yet, adjust your W-4 to boost your paycheck throughout the year and apply the additional money towards your debt.

5. Transfer Balances. If you have a good credit score, consider moving your debt to a 0% credit card. Usually, when you apply for a new credit card, you will get an offer to transfer a balance for a low interest rate for a limited period of time; usually 6-12 months. offers a list of several cards that offer low rates on balance transfer credit cards. Remember though, this card is to be used for balance transfers only!!! Once you receive the card in the mail, cut it up immediately.

The above are tips to get you started but ultimately, debt reduction is about spending less than you earn and not incurring additional debt.

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  1. journey2mymba // July 20, 2009 at 6:09 PM  

    Great Ideas! I have done some of these already.

  2. mike // July 21, 2009 at 12:49 AM  

    Make a budget and stick to it. Hold yourself accountable. Track your money meticulously and know EXACTLY where it is going and how much you are spending. You will be surprised at how much you spend on unnecessary things.

    Before I started doing this, I had no idea how much I was spending on such items as "Drinks" and "Entertainment"

  3. get out of debt // July 23, 2009 at 6:07 AM  

    Thanks for sharing such great post, according to me after getting out of the debt trap you'll be tension free, but for that you have to list out your expenses and try to remove all that which are not necessary. On the other hand you can find some other way to earn extra income and save it in safe manner. By following all this ways you can boost your credit score and get out of debt.

  4. Bank Gal // July 23, 2009 at 9:09 PM  

    I just applied for a credit card at 0% interest for 12 months. I was approved for the card and am transferring $2,000 from my Nordstrom credit card to my new 0% interest card. The limit on my new card is $2,500 which I am glad it's so low so I can't spend too much money on the card. I plan on cutting up my Nordstrom card AND my old WaMu card and ONLY sticking with this new card at 0% for 12 months and my interest-free AMEX (the balance of the card is due in full by the end of each month, so I don't earn interest, which I really like). I don't like having just one card for emergencies, especially when one of them has a balance on it already.

  5. George // October 6, 2009 at 10:52 PM  

    I agree that creating a budget is key. Also keeping a checkbook register to keep track of account balances is important to know where you stand at all times.