How to Get Rid of Debt in One Year

How to Get Rid of Debt in One Year
Mike Randall
By: Mike Randall
Posted: August 9, 2013's popular "How-To" series is for those who seek to improve, rebuild or better understand their subprime credit rating.

So you’re tired of living under a mountain of debt and want to be debt-free in a year. Well, you can take inspiration from others who have done exactly that.

One couple even rid themselves of $50,000 in debt in one year. Of course, they made some extreme sacrifices in all areas of their life – but they proved it is possible.

The reason most people find themselves in debt is simple: They’ve been living beyond their means.

I know this is not true for everyone who has a high debt level. Some people have accrued medical debt or other unavoidable expenses.

But whatever the reason you find yourself here, the solution is the same: You must learn to live on less.

Your ability to get rid of debt in one year is dependent on many factors. In this guide, I’ll lay out some of the best ways I’ve found for accomplishing this goal.

These suggestions may not be possible for everyone to do, but let them act as a framework for designing your own plan.

Now, ask yourself this question: How committed am I to getting rid of debt in one year?

If you’re ready to learn how, read on.

1. Commit to accruing no more debt from this point forward.

If you want to pay off your debt in a year, then it makes no sense to accumulate more.

Make plans to use cash or a debit card for every purchase from this point forward. Also, track all of your expenditures – each and every one.

2. Identify and document all of your debt.

Use a spreadsheet or a computer-based application that allows you to monitor and record your progress. Divide your total debt by 12 so you know how much you need to pay down each month of the year.

3. Identify all of your liquid assets.

These are things that have an immediate value and can be easily turned into cash. This doesn’t mean you have to pawn your mother’s antique jewelry, but you do need to know the value and worth of the assets you hold.

“The sacrifices anyone makes in order

to get rid of debt is up to them alone.”

4. Calculate the earnings from your job and any other sources of income.

Consider extra ways you can earn money, including working overtime if that’s an option.

Now you know where you stand and just how much sacrifice you will need to make in order to achieve your goal of being debt-free in a year.

The following steps will show you how to maximize your debt payments by minimizing your expenses – putting the most money possible toward your goal.

5. Identify all of your monthly expenses apart from your debt.

Comb through these carefully to identify areas that can be eliminated.

Cut out anything that is not absolutely necessary to live on. This includes expenses like entertainment, meals out, new clothes, taking trips, etc. It also means conserving on electricity, water and gas.

Anywhere you can cut expenses, do so.

6. Need to cut even deeper?

Try these suggestions:

  • Consider moving to a smaller (and cheaper) residence. Possibly even move in with relatives.
  • Have a garage sale and/or sell extra furniture, tools, equipment or even an extra vehicle.
  • Buy groceries in bulk and make enough for leftovers. Take them to work for lunch every day.
  • Drive less. With gas so expensive, plan your trips to the store to coincide with your commute.
  • Live more frugally. Buy less, including shopping at discount and thrift stores.

7. Use any extra income to pay down debt.

After completing step two, you know how much you need to put toward paying down your debt each month. Well, don’t stop there.

Any extra you generate should also go toward paying off debt. Don’t reward yourself with little “treats” – there will be time for that in a year.

8. Work toward changing your attitude about money and finances.

Developing a healthy approach to money management is the key to getting rid of debt and not repeating past patterns.

Be conscious of every dollar you spend and of the relative value it brings you. Ask whether what you’re about to spend money on is worth more to you than getting out of debt.

The sacrifices anyone makes in order to get rid of debt is up to them alone. Every circumstance is different, and each person must decide the right actions to take for their situation.

I hope this guide is useful and will help you to actually get rid of your debt in a year. My best wishes are with anyone who has made a commitment and is on this path.

Drop us a note and let us know how you did. Good luck!

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