Canadian Finance Blog

Posted: 23 May 2011 02:00 AM PDT

Do you want to know how to get out of debt, but are not sure where to start? Last summer my wife and I were able to pay off all our consumer debt by reducing our expenses, increasing our income and increasing our payments.

Reduce Your Expenses

The first step to get out of debt is to find out how to save money each month. The can be anything from reducing your electricity bill to making sure you always save money on groceries. You can find room to save in almost every expense… try not buying new clothes for awhile or staying home to eat instead of heading out the restaurant.

Increase Your Income

You might have more options to increase your income than you realize. Many people might assume that the only way they’ll make more money in to get a raise at work. But other sources of income could include selling items on craigslist, having a garage sale, or more passive income streams like dividends from your investments.

Increase Debt Payments

If your serious about wanting to get out of debt, you’ll need to start paying off debt at a faster rate as you free up money or earn more income. You can pay your debts with a debt snowball, where you make a larger payment to your smallest balance until that account is paid off. This is mostly for the momentum it gives you psychologically to see some credit cards being eliminated quickly.

Instead of a debt snowball, we applied any extra money to the highest interest debt first. While it might not have been the smallest balance, I knew I wanted to eliminate the drag from high interest debts.

Have you been in debt and paid it all off? What steps did you take to get out of debt?

How To Get Out Of Debt originally appeared on Canadian Finance Blog on May 23, 2011.