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Those who are in debt and cannot afford to pay the interest are often anxious to find out how to get out of debt. It is not easy to just become debt-free; it takes a lot of planning and discipline. There are some options to help you become debt-free and they do not involve bankruptcy at all.


To break out of debt simply use a budget. To begin with, you need to know how much money you make every month. To find out how much you earn every month, you can use a monthly budget form or you can just write your income on a piece of paper. If you are not paid by the hour, you can use a 1040 scenario to only have a thorough idea of your income and expenses.

A budget includes all of your expenses, whether you are paying off a car loan, a house, a credit card, or a student loan. As you put in your budget, the key is to write down the minimum amount of money needed on each debt. In many cases, the interest that is paid, such as on a car and a house payment, is the same payment each month. You should include such amounts as well as also the total interest on the debts. Once you make a budget and know how much you earn, you simply need to have a designated amount of money to pay off your debts.


For example, let’s suppose that a person has three credit cards. His budget hopefully shows he has $700 a month for each credit card. Only one card has an outstanding balance, so that will be using $400 for each card. Two of these cards (for a total of $1200) will be $600 short for one month. Let’s say that to each of the credit card companies, you will pay $160 a month. Now, with two of the credit cards, $80 of the $200 you paid in two months, you have $240 which is where you put your $240. This is simply done by dividing the $240 by two because you are paying $80 each month on credit card 1 and $120 on credit card 2.

For credit card 1: $1000 / $160 x 50 = $240


Credit Card 2: $200 / $80 x 50 = $160


By now, it should become clear that not all the money you pay on credit card interest is being received in the correct way. You are being charged interest twice; first when you purchase the item and then again when you pay it off if you pay it off early. You may already be paying a lot of interest and some of your money is still going towards one debt. You can adjust your budget so that the money goes to the credit cards that have the least amount of interest. This way, you end up paying less on these credit cards, which means you can pay them off faster.


To be able to use a budget, you have to automate the process. There are several free programs on the web which will help you in creating a sound budget. The difficult part is sticking to the budget. It takes a lot of discipline, as well as motivation, to be able to scrape enough money together every month to pay your debts and living costs.


The truth about money is that when used correctly, you can become rich, or you can become poor or do both. Every time we acquire money and do not use it wisely, we either gain experience or pay the price, but both outcomes are satisfactory. It is how we use our money that makes the difference.