How to get rid of debts?

1. Determine your current budget. Keep a record of all money moving in or out of your household for two weeks—or a month, if that is more practical. Add to this record expenses such as taxes, insurance, or clothing, which may occur much less frequently, and use monthly averages for them.

2. Increase your income. You could take on extra shifts at your current job, perform seasonal work, tutor a student, recycle, or make your hobby into a home business. Caution: Take care not to allow work to encroach on activities that are more important, such as your spiritual routine.

3. Reduce your expenses. Buy an item only if you need it, not just because it is on sale. (Proverbs 21:5) “Waiting to buy is good,” says Enrique, quoted above, “since it helps you to decide if you really need the item or just want it.” Here are some additional tips.

Housing: If possible, move into a residence with a smaller monthly payment. Reduce your utility costs by conserving electricity, water, and heat.

Food: Pack a lunch or snack instead of eating out regularly. Use grocery coupons and other special offers. “I save on fruits and vegetables if I shop at street markets just before they close,” says Joelma, in Brazil.

Transportation: Sell nonessential vehicles, and maintain what you have instead of quickly trading in for newer models. Use public transportation, or walk whenever you can.
After you reduce your expenses, you are ready to make the best use of your remaining money.

4. Analyze your debt and act. First, determine for each debt the interest rate, the fees, the impact of a late or missed payment, and the possibility that a payment is already overdue. Examine the wording of the loan or bill carefully, since creditors may be deceptive. For example, one short-term loan service in the United States stated that its interest rate was 24 percent, when, in fact, it was over 400 percent.

Next, determine the order in which you will tackle your debts. One approach is to pay toward debt with the highest interest rate first. Another option is to pay off smaller balances first, since receiving fewer bills each month will likely boost your morale. If you have loans with a high interest rate, you might benefit by getting a new loan at a lower rate to pay off the existing ones.

Finally, if you cannot meet your obligations, try to negotiate new payment plans with your creditors. You could ask for an extension or a lower interest rate. Some creditors may even be willing to reduce what you owe if you can pay the lower amount in full right now. Be honest and courteous in explaining your financial situation. (Colossians 4:6; Hebrews 13:18) Put any agreements in writing. Even if your first request is not successful, be willing to persist in asking for an adjustment if necessary.—Proverbs 6:1-5.

Of course, you will need to be realistic as you manage your finances. Even the best plan can fail as a result of factors beyond your control, since money often “makes wings for itself like those of an eagle and flies away toward the heavens.”—Proverbs 23:4, 5.

TRY THIS: Once you have prepared an initial budget, discuss how everyone can reduce expenses or increase the family’s income. Seeing one another’s sacrifices can help to pull you together in the fight against debt.