Eliminating Debt: Step 1

So you are in debt. And want out.

If you have decided that you want to make a big leap and get out of debt - good for you! I promise, that decision will be one of the most liberating decisions you will ever make!

Now, I've said before that the process of getting out of debt is usually miserable, but I promise you won't regret it. Ever.

Step One: Stop the bad habits.

Sound easy? You'd be surprised how challenging it can be.

It is absolutely imperative that you stop digging a deeper hole of more debt. Probably the biggest problem with most families is credit cards. If your debt on your credit card (I mean the balance, not the minimum payment) keeps growing and is never being paid off, CUT UP YOUR CARDS! Or at least cut up all but your oldest card. Then, go to a strictly cash budget. Even if you don't have enough money right now to pay off any of the debt on your card, at least you are not going deeper and deeper.

A system that works well for a cash budget is called the Envelope Method. It will help you get on the right path to spending less than you make, which is key to getting and staying out of debt.
1. Create an envelope for each category of spending (house payment, groceries, etc.).
2. When you get paid, get all cash for your check.
3. Divide the cash between the envelopes.
4. Use only the cash that is in each envelope for your expenses. When an envelope is empty, you're done spending any money in that category for the month. Any extras goes directly to paying off debt - No shifting cash between envelopes!

See this article in LDS Living Magazine for a new cash management system called Mvelope. (I haven't had any personal experience with this program, but I have heard good things about it.)