Struggling to Make Ends Meet? How to Pay Off Debt

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It's not just your imagination - a lot of people are struggling to make ends meet right now. Families are scrimping and saving to meet their monthly obligations, paychecks are being used to the max, and in some cases people are coming up short at the end of the month. All across the U.S. and throughout the armed services, the toll of the recession and stagnant wages has resulted in a precarious balancing act for individuals and families who live with the possibility of financial disaster .

On top of that, many of those same families have debt, which means they probably sometimes feel like a tube of toothpaste that is being squeezed on both ends. If nothing changes, their finances may explode.

But don't worry, there is hope! Below, we'll outline a plan, with specific actions, that you can take to regain control of your financial situation:

1. Look for any big money-saving opportunities

The foundation of your financial power is your budget. If you have not started a budget yet, now is the time to do so! All you need is a spreadsheet and a list of your monthly expenses. You can read our article on How to Create a Budget for a detailed guide to starting your budget. Then, once you've got your budget in place, look at the things you spend the most money on and see if you can find any ways to reduce your spending in those areas.

Some things you can try are canceling your cable TV and shopping around for better car insurance rates (or even downsizing your car to an older model to reduce your monthly payments). It's also wise to examine your food budget because many of us wind up spending more than we expect on meals outside the house plus our usual grocery shopping.

Also see if you can save money on "hidden" things like your energy bill. Sometimes installing "blackout" curtains can help you regulate the temperature of the house and lower your heating/cooling bill.

2. Think about increasing your income

The internet has made it possible to increase your income through a few hours a week of freelance or contract work. There are now sites like Elance.com, Odesk.com, and Freelancer.com that allow you to bid on job proposals that may pay anywhere from $8 per hour to $50 per hour. Even if you've never done something like this before, you can probably find something that suits you. You could transcribe audio files for people, write articles for small businesses, design logos or graphics, or help people organize their digital files. There are also sites like Minted.com (which offers opportunities to design greeting cards) and Etsy.com (for selling arts and crafts. In other words, there is something for everyone!

Another way to add some income to your monthly budget is by selling items that you no longer need. A lot of people have closets-full or garages-full of unused things that they don't use anymore. And selling those things online (via eBay or Craigslist) has never been easier. You could potentially had hundreds of dollars to your budget this way.

3. Deal with your debt wisely

What kind of debt do you have? Do you have credit card debt? Student loan debt? Mortgage debt? Depending on which type of debt you have (and how much), there may be different options for you:

Credit card debt: The most important thing to do is make sure you've got the lowest interest rates available to you. Your debt will be much harder to get rid of if the interest rate is extremely high - particularly if it's 20% or higher. So first, call your bank or credit card company and ask them to lower your rate. Sometimes that is enough to get your rate lowered. If not, then consider doing a balance transfer to a card with a 0% introductory rate. Keep in mind that some balance transfer offers have hidden fees - so be sure to read the fine print carefully. Even better, try doing a peer-to-peer debt consolidation loan with LendingClub.com or Prosper.com. That may give you a lower interest rate while also allowing you to zero out your credit card balance and lock up your card in a safe somewhere so you're not tempted to use it in the future.

Student loans: If you're in the military, remember that you're eligible for relief of student loan debt. For family members and others who are not eligible, there are programs like income based repayment, which can give you some breathing room in your budget (and also requires more interest payments in the long run), and public service loan forgiveness, which can erase all your debt after ten years of working in the public sector. And remember, unlike other types of debt, student loan debt is extremely difficult to discharge in bankruptcy.

Mortgage debt: If your monthly mortgage payment is too high then you can try calling your lender and asking them to adjust your mortgage. Like income-based repayment, this might result in you paying more interest over time, but it could be worth it if you need the breathing room in your budget. You can also look into refinancing and decide if it makes sense for you to do that. Locking in a lower interest rate on your mortgage via a refinance would certainly help make your monthly budgeting more manageable. If you qualify, there are government mortgage relief programs that can be of assistance too.

Paying off your debt is hard, but you can do it. Use the tips in this article and you'll be on your way to becoming debt free! If you want to track your progress you can also search for online tools for paying off debt. And if you're going to get a tax refund in the next month or two, try to use it to pay off your debt.

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Benjamin Feldman is a writer and personal finance expert with ReadyForZero, a website that helps people pay off debt on their own. He recently paid off his own credit card, and he enjoys writing about how to save money, how to improve your credit, and how to get out of debt. You can follow @ReadyForZero and @BWFeldman on Twitter.

Related articles:
Which Credit Card to Pay Off First
Top 5 Money Saving Ideas

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