Debt is a huge crisis that society is facing right now. In fact, having debt is one thing that most people have in common. Truth be told, when you see yourself drowning in debt, you no longer know where to go, what to do, and where to start.

If you think that you’re already in your debt too deep, getting out of it might be really hard but here are tips to get yourself out of debt.

Recognize

Knowing exactly how much you owe in utilities, the bank, or some people you may have borrowed money from is the first step to getting rid of your debt. The key is recognition. Finding out how much debt you have will help you allot and set amount of money you can pay every month- or at least every time your pay checks come through. Once you already know exactly how much you need to repay, you can add them all up.

The Calculator app on your phone is your friend. Jot down every debt on a journal so that you can keep track of the numbers you are punching in. It will help you determine the total amount of debt you are supposed to be paying- which, as said earlier, will help you specify how much you’ll be setting aside for each debt. Use our online budget planner now.

Categorize

Once you’ve already recognized each debt you owe, it is advisable to put them into little categories to help you get rid of them as quickly as possible. It will help you see which ones to prioritize. It’s not that any debt is a little less important than the others, but we all know that debts sometimes have different due dates, interests and fees. Thus, the reason why categorizing them upon recognition is the second step to satisfying each of them.

The monthly utilities should be put on top of the priority list- unless you’re willing to live without proper water sanitation and electricity. The next items that should be listed are your mortgages, auto loans, and your credit card debts. In extreme circumstances, roaming around the streets isn’t as fun as it sounds- especially when you are car-less because the lender pulled it and the fact that you know that you no longer have a house to return to.

Pay off

We all know that this is the hardest part. Money isn’t that easy to find, but it is very easy to lose. Even though it’s easily spent, knowing that it is going straight to your debts- is nerve-racking and physically draining. But get this, once everything is fully paid, you can start off on a clean slate.

When repaying your obligations, you need to make sure that you followed the second step–categorizing to know what to pay off first.

You can pay high interest debts, fully pay small balances or start with the ones with the lowest interest rate. If you have very limited income, you should pay those debts that have a lower balance though it has lower interest rate, but you should never neglect your priorities.

Each month, you should try to at least pay off the minimum you could on each of the credit cards and other items on your list so you could say that you finally said goodbye to certain debts even smaller ones. The next thing you know, you’re already debt less.

Budget

Well, now that you’re finally starting to pay off your debt, you should keep a well-planned budget. Recognizing that you only have limited money to spend for yourself, at least make sure that you wouldn’t starve. A simple lifestyle might help you.

Although changing your lifestyle might be hard, it may be the only way you could fend for yourself whilst waving goodbye to a huge chunk of your monthly income.

You can set up a small, pie chart for your monthly budget- at least 10% of your salary- and mark off each piece of pie for your every need. If you think you could use your credit card, use it. Just make sure that you wouldn’t be spending more than 30% of its credit limit or else that’ll be another item to add to the extremely long list of debts you have.

Improve

As a matter of fact, a ton of debts would push down your credit score. The higher is the balance the lower the score.  Once everything is paid, either because of debt consolidation loans or by a good debt repayment strategy, you can have a fresh start.

Start building your credit rating by waiting. It will take up about a year for your score to improve even though you aren’t really doing anything. When the time comes that you have to take out another loan, make sure that you pay it on time so that your score will go up; making your credit report clean and well-polished. That way, if you ever take out another loan after this one, it’ll be a lot easier to get approved. Just remember the golden rules in debt management: Keep your utilization rate lower than 30 percent, pay your bills on time, keep your oldest credit card active and don’t make too many hard enquiries within a short period of time.