What's the best way to get out of debt?

Question

I have a friend who is having a rough patch...financially and I was wondering if anyone had any advice to offer.

Answer 1

Step 1 - Stop spending money

Step 2 - Establish a budget (BUDGET is not EVIL)

Step 3 - Shop on a cash basis.  Groceries, Clothes, Entertainment, Eating out.

Step 4 - Continue to budget.  Forever.  Establish this habit and stick to it, you will not go into debt if you follow it.

Why step 3?  It makes you realize how painful it is to spend.

Answer 2

How to get our of debt..

First, Immediately QUIT spending money. Stop.

Now, look at the debt load and determine what must be paid first.

Start paying. If the payment is too high, contact the lender and inform them that all that can be paid will be paid. Try to make new terms with them.

There is a lot more that can be said to this, such as get a 2nd job which you mention, or start selling stuff, but the first step is to keep working and stop spending.  

Answer 3

If your friend is diligent and able to reign in any impulses, she needs to sit down for the next few weeks and track every penny she spends.  Then she needs to look at her spending patterns and cut out anything she can - for example, if she is spending $5 a week on bottled water, bring an empty bottle to work and fill it up from the water fountain/tap.  Same with everything else.

Once she has identified where her money can be saved, she then needs to take this extra money and use it to pay bills.  Start with the highest interest rate bill first and pay extra until it is paid off (paying the other bills at the same time so she doesn't go delinquent).  Once paid off, move all that money over to the next highest interest debt and do the same.  Continue this until everything is paid off.  

When looking at her budget, your friend also need to identify other places to save - for example, store brands instead of name brands, cut coupons, etc.  Every cent saved should go to paying the bills until she is out of debt.  Oh, and cut up her credit cards - no using them until everything is paid.

An alternative is to meet with a credit counselor who will help her negotiate with the  credit companies.  Most likely, the counselor will out her on a tight budget and have her cut up her credit cards.

Answer 4

Suggest to her to make a budget to see where she's not spending efficiently and to work out a plan to make ends meet on her current income.  

Get her to write down all of the sources of her debt (credit card, loans, etc.) as well as their balances and minimum payments.  Get her to pay the minimum payment on all of her debts except for the one that can be paid off the soonest.  For the one debt that can be paid off the soonest, have her pay as much above the minimum payment as her budget will allow.  

Also suggest she tuck away a little bit of savings each paycheck so that she has an emergency buffer between her current spending and going into further debt.  

Children aren't cheap but they shouldn't cause bankruptcy.  The freecycle is a great place to get new toys, and consignment stores have clothes that are $5 or less.  Making the family's meals from scratch saves a lot of money compared to buying jarred baby food or eating out.  

Wishing your friend the best.  She is lucky to have a nice friend who cares like you.    

Answer 5

chapter 13 or 7

Answer 6

There really is no painless or easy way to reduce debt.  Spending comes to a screeching halt, nothing unnecessary, reduce consumption and take every dime available to pay down the highest balances with the highest interest rate first.  She could re-assess her possessions to see whether she could earn extra money from them by having a garage sale and put that toward the debt.  Re-evaluate services like cable, movie channels, housekeeping, landscaping, etc. to see whether any can be done without.  

Answer 7

start selling on ebay.