10 Ways to Get Out of Debt Without Ruining Your Future Credit

Are you sick of spending large portions of your monthly income on repaying loans, credit cards and hire purchases? Do you wish you had made better financial choices when you were younger? Or are you still feeling the financial pinch following a personal crisis?

Whatever it is that got you into debt, you're not alone. Literally millions of people are repaying money they wish they had never spent, or being penalized month after month for a time when they were forced to rely on credit.

There is hope. You can get out of debt and take control of your financial future.

These ten simple steps show how you can get started:

1. Work out where you are - it sounds obvious, but so many people begin to bury their heads in the sand when finances are hard. Be brave and confront your debt. Make a record of exactly how much you owe, to whom. Include the repayment period, the monthly installments, and the interest rates for each, as well as the dates each of these payments are required each month.
2. Budget - now you know exactly where you are in terms of debt, you need to consider this in terms of your total income and other outgoings. Make a record of all sources of income you receive as a family, together with all outgoings. Are there some luxuries you can temporarily sacrifice to overpay your loans and get out of debt faster? By having one take-away less each month, how much can you overpay your mortgage or credit cards by? Be careful to examine your direct debits - these are often forgotten about instead of canceled. Do you need and make use of all of the services and products you are charged for? If you have a newspaper or magazine subscription, consider reading this free online instead - it's surprising how much daily newspapers especially add up to each month. Using this information, create a sensible plan to overpay the debts with the highest interest rates. Include the whole family in this process so they understand why they are sacrificing the takeaway or newspaper - this is a great financial education for children and something the school won't teach them, so don't feel bad for involving them.
3. Be disciplined - when you feel the financial pinch, it's tempting to resort to getting further in debt. Previously, this has been an option for almost everyone, but as the economic climate changes, more and more people will be refused further debts. Get out of the habit of relying on additional credit right away. If you need additional money, firstly question whether you do really need it, and then brainstorm ways of raising that amount without going further into debt. Websites like eBay and CraigsList make it easy to sell anything you no longer use, and a pre-Christmas clear out can usually raise a surprising amount of money for Christmas gifts. (I mention Christmas as it is the most popular time for new applications for loans and credit cards - don't do it. Plan ahead.)
4. Track daily spending - often, when completing step two (budgeting), people will not understand how they spend all of their income. In other words, the numbers don't add up. To obtain a clear view of your finances, it's essential to track daily spending. Each family member should do this, and honesty is key. If you are spending £5 on lunch each day and your spouse is having a Starbucks coffee each day, you are spending a sizeable chunk of money every single month on things that are not necessary. Using these examples, you're spending around £158 each month! What a difference that could make if it was used to overpay your highest-interest debts. To lower this spending, only take your debit and credit cards out when necessary (often we fool ourselves that we need them 'in case of an emergency') and take just as much cash as you will definitely need for vital outgoings like bus fairs, parking expenses, etc.
5. Bond with your bills - most service providers will offer you a discount for paying by direct debit. Give them a call today and arrange this, taking note of the amount saved each month. Use this extra cash to overpay your highest-interest debt.
6. Shop around - it's very likely that you are not being charged the lowest price possible for your utilities. Using a quick Google search you can find impartial comparison sites for everything from telephone to electricity and internet providers. Find one of these sites for your country and switch to a cheaper provider. You guessed it; use the amount you save by doing this to over-pay your highest-interest debt.
7. Transfer debt - repeat step 6 but in terms of your credit cards and loans. Shop around for ones that charge lower interest rates than your current ones, but don't get fooled into topping up loans or taking on extra sums and extending the period of the loan.
8. No more store cards - these usually charge by far the highest interest rates and see you paying well over the odds for the original items bought. Cut up any existing store cards and don't be tempted into getting new ones. Despite the great initial discounts they may offer, the danger of getting into more high-interest debt is too great. Get used to paying for things with cash, which forces you to recognize the amount you are spending and often makes you realize you don't want the item in question that badly!
9. Bye bye bank - repeat step 6 but this time, for your bank account. Look at online banks particularly, as these are often much more favourable than the larger high-street banks.
10. Review your mortgage - for most people, the mortgage is the biggest expense each month. Spend some time ensuring you are getting the best deal. Speak to an independent financial advisor to see whether you can save money by changing, but remember to take into account any transfer fees and other penalties.

Using just these ten steps you can monitor your outgoings, allowing you to overpay your debts. This will get you free from debt quicker and will also give you a sense of achievement from saving money, instead of the happiness many people get from spending it. As your highest-interest debt is repaid in full, you can then apply that complete sum to the next-highest, and so on.

With discipline, you can set your family free from financial debt.

How Do I Get Out of Debt?

It's a question we've all asked ourselves; anyone who's ever owned a credit card, taken out a student loan, financed a car, or paid a mortgage has accumulated debt. Debt can feel overwhelming, but you don't have to be a slave to it. You just need a little common sense and some budgeting savvy. Remember, you own the debt - not the other way around.

If you follow three budgeting rules, you can be debt-free twice as fast than if you carry on using traditional guidelines (like the minimum payment) and spending habits (like reasoning, "I can't afford this now, so I'll charge it"). Just because the rules are simple, it doesn't mean that they're always easy to follow. Some will take very little effort; others may be more difficult at first. But once you create a healthy financial habit and witness the results, you'll never regret it.

Step 1. Cut spending.
If you're not sure where to start, try to track your spending for one week. Even one day's tracking can be helpful. Notice where you're letting your money go, apart from your bills, mortgage and car payments, and groceries. Maybe you buy a cup of coffee or a bottle of water every morning on your way to work. Perhaps you order pizza every Thursday for the kids. Watch where your money goes, and see where you can make some cuts.

Budgeting is not about total deprivation; it's about being sensible. Treat yourself to a latte or a doughnut only on Fridays. Order pizza once a month instead of once a week. If you tailor your spending even the slightest bit, you will save money that can go directly towards debt removal.

Step 2. Pay off your credit cards.
Commit to making a fixed monthly payment at least a little above the minimum (5%-10% is best, if you can swing it). Make that payment every month, even as your minimum payment goes down. You'll pay off your card in record time, and after it's paid off, you can use that monthly contribution towards other debt, or put it into a savings account.

This really works. Check out the calculator on bankrate.com at www.bankrate.com/brm/calc/MinPayment.asp to find how making a fixed monthly payment to your credit card can save you thousands of dollars in interest and knock several years off of your debt.

Step 3. Never put more money on your credit card than you can afford to pay off each month.
Think of it as the "golden rule" of getting out of debt. As much as it pains you to put off buying that sleek new iPod or leather sofa or cashmere twin set, you must only charge what you can afford to pay off completely. Treat credit card purchases like cash. That way, you can organize and simplify your spending without paying the back-breaking interest on purchases you can't really afford.

Remembering and sticking to these three steps will put you on the fast track to getting out of debt. The key is not to abandon these good habits. It's tempting, especially during the holidays, or special occasions-sometimes even after you've managed to save some money-to break one of the rules. But even leaving $50 on your credit card from last month can lead to a financial train wreck. If you can only make your committed payment the next month, you'll begin to fall behind again, and the credit card companies will charge you interest on all the money that carries over each month.

The next time you ask yourself "How do I get out of debt?" remember: Cut spending. Make fixed payments. Don't over-charge. You'll be amazed at how much faster your debt recedes, and how much money you can save. It's an easy, sensible start to a process that could take over 30 years if you don't make a commitment to those three rules. Wouldn't it be better to enjoy life debt-free?

Don't stop there.You can do more than get out of debt. You can start saving towards your future. Every week, two weeks, or month-whenever you get a paycheck, pay yourself first. Before bills, before groceries, and especially before entertainment, you must put a percentage of your paycheck into a savings account. And don't dip into it! You won't accumulate savings unless you leave it alone. If your company offers a 401(k) option, take it. You won't even miss the 5% or 6% that's already come off the top of your paycheck. If you don't have that option, consider putting the savings into a CD at your bank. If you pay yourself first, you will save money that will be useful for financial emergencies, and also as a nest egg for investment later on.