Get out of Debt - Get Out of Debt Plan

You want to get out of debt and do it as fast as possible. You want to get that feeling of lead off your back. You want to sleep again. You want to go to the mailbox and not cringe when the bills show up.

The obvious first step is you need to design a get out of debt plan. So lets look at how you might do that.

The first step of your plan to get out of debt is to determine how much money you have coming in versus how much money is going out. Sounds tough, but it's not.

- Let's figure out your monthly income:

Look at you pay check(s) and write down how much you take home AFTER taxes. This is important because you can't spend what Uncle Sam and any state taxes take out of your check. If you get paid weekly multiply that 4 (or 2 for semi-monthly) to get your monthly take home.

To get a pretty good estimate simply add all the checks, ATM withdrawals, and Electronic withdrawals from your checking or savings accounts from the last full month. Make sure to note the largest debt payments you find (credit cards, car loan, etc.).

If you come up with a negative number then you have a negative cash flow. If you come up with a positive number you have a positive cash flow.

Negative cash flow: Your debt will continue to grow at your current life style. You will have to reduce your cash outlays and/or increase your income. Increasing your income can be difficult. Where do you find the time? Cutting expenses is somewhat easier but painful. Typically the best thing to due is restructure your debt from short term to longer term and high interest to low interest so that your monthly payment on debts is smaller.

Credit card debt is the most common and worst kind of debt to have. It's easy money and the interest rates are sky high. You must get your credit card debt restructured to a lower interest rate.

Car loans are common debt and not always easy to restructure. The problem is we all like nice things and a nice car let's the neighbors know we are doing well. Most car companies let you finance a very large share of the purchase price, and monthly payments of $500 or more a month are not uncommon. If your car payment is a major source of monthly expense, you could always sell your nearly new car and buy a used one. You may have to be prepared to be 'under-water' when doing this due to the high depreciation of new cars. You might owe $20,000 on your car loan, only to find out the car is worth $17,000.

Mortgage and Student Loan debts are worth while. You are investing in an asset the will typically increase in value. If you're debt you are having trouble paying is a mortgage or student loan, you should at refinancing and increasing the term of the loan. While nobody likes to do it, that lower monthly payment may be a savior.

There could be better options out there and that's when it's time to call the pros for some advice.

Positive cash flow: Your making ends meet, but want to pay down your debt faster? You can pay your debt down faster with the extra money you have every month. You will want to pay down the highest interest debt first. You can also consolidate debt at a lower interest rate and payoff your debts faster with the same monthly payment you're paying now.

In either situation you may benefit from restructuring your debt. There are a number of reputable companies that can evaluate your debt and make suggestions on how to reduce your monthly debt payments or pay your debt down more quickly.

So, figure out your basic financial status by doing step one so you have this info ready when you talk to companies about your debt.