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How to Get Rid of Credit Card Debt

A Step-by-Step Guide to Getting Out of Debt

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To get out of debt, you need to:

  1. Assess Your Debt
  2. Create a Budget
  3. Cut Your Spending
  4. Start Saving
  5. Attack Your Debt

1. Assess Your Debt

Woman holding various credit cards, close-up (focus on foreground)
Peter Cade/Iconica/Getty Images

Jump start your debt reduction efforts by figuring out just how much debt you have to deal with, and how you're going to deal with it. Here's how:

2. Create a Budget

A well thought out budget will help you to get out of debt and stay out of debt. Spend a couple hours going over your finances; then, create a budget that severs your reliance on credit cards. Cash-only is the goal from here on out.

3. Cut Your Spending

To free up money for debt repayment, you'll need to cut your spending. Look for ways to lower your electric bill, phone bill, homeowner's insurance, auto insurance and all of your other bills. Challenge yourself to eat out less, cut your grocery bill and to take up free or low-cost hobbies. Then, apply your savings directly to your debts, and enjoy the knowledge that you're one step closer to a debt-free lifestyle.

4. Start Saving

Getting out of debt is as much about paying off debt as it is about avoiding new debt. That's why it's important to prepare for the unexpected – car repairs, medical bills, time off from work – basically any expense that could cause you to pull out that credit card and start spending again. Estimate how much of a cushion you'll need to shield yourself from surprise expenses; then, set that amount aside in an emergency fund. If you can't afford to fully fund the account now, that's okay; just set aside a small amount each month until you reach your savings goal.

5. Attack Your Debt

Once you've completed all of the previous steps, it's time to start attacking your debt. Take the money that you've freed up with your new budget and spending cuts, and apply it to your debt. Then, keep at it, until all of your debt is paid in full. It may take a while; but if you stick to the plan, you'll arrive at that finish line a stronger, happier – and most importantly – DEBT-FREE person!

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