Getting in debt is as common as getting a cup of coffee in today’s modern world. The debt that most people incur continue to be increase at a faster rate that the money that they can bring it. The end results is personal bankruptcy is on the rise, especially in difficult times like these as more people are borrowing more on credit.

Increase in debt can be attributed to several factors. If we dig deeper we can all point out to the creation of credit cards as the major factor. Credit cards was introduced by Diners’ Club in the 1950. The premise of credit card is it allows consumers to purchase items by borrowing short term from the issuer of the cards with the agreement to repay back in the near future.

Most adult consumers today have at least 3 or more credit cards. If each card carries a credit limit of $5,000, a person can easily be in $15,000 debt or more easily in a very short time. The major problem with credit cards are that they allow the borrowers to carry forward the balance to future dates as long as the borrower continue to pay a minimum balance every month. The interests that credit card carry is usually high and the more the person borrow the more the person will have to pay in the future due to compounding interests.

As more and more adults continue to borrow from credit cards, the likelihood for the borrowers to pay off the debt becomes more and more difficult. This post is to touch on several strategies on how to become debt free. There are a lot of articles out there describing how one can be completely debt free in a very short time. However, I can tell you from first hand experience that this is close to impossible unless you are very discipline in your expenses.

I remember when my son was growing up he told me that we will never borrow money from the banks and will be debt free forever. In an ideal world this is possible. However, in today’s modern world, being totally debt free is a dream. Regardless how well we plan our finance, carrying certain debt is unavoidable. The question is how do we control our debt before it becomes out of control.

Get to Know Your Own Finance

Before we incur any debt, you need to be aware of your current finance. That includes if you have any outstanding debt, your current income and if you have any disposable income. Based on you current asset, you can easily determine if you are able to purchase the shiny new car you always dream off or if you can treat yourself to a vacation in the Caribbean. One way to find out if you can afford to make such purchase is by doing a detail monthly budget. Keep in mind that it is a budget and it should be used as a guide. My past experience showed that budgeting rarely work because there is always unforeseen circumstances that make sticking to the budget impossible.

Pay Off Credit Card First

Credit card debt is considered short term debt; mortgages and car payments are considered long term debt. Long term debt must always be paid off first; any leftover money that you have should go to credit card debt because they have high interest rates. The longer the debt the more expensive it is. To prevent from incurring any more debt, I recommend that you place the credit card with the highest balance in the drawer so you are not tempted to use it again. Once you finish paying off one card, continue paying off another card using the same strategy.

Consolidate Balance

One other option to managing paying off credit card is by consolidating the balances of the credit cards into one. You may consider using some of the debt consolidation services available online. Some do carry some fees so it is important to do some research and try to understand the terms and conditions. Consolidating the debt in one account allow paying off the credit card manageable. Some services allow you to negotiate a lower interest rates depending on your credit history. This will allow you to save thousands of dollars in the long run.

Use Cash Only

Credit cards are necessary evil. They are convenient especially for emergency use or if you need to purchase something very expensive. However, more and more people use credit cards to make all purchases; carrying cash around is no longer a practice. Using cash allow us to limit our purchase because we can tell how much cash we have and if we are able to afford the purchase.

Cancel the Credit Cards

Don’t be tempted by all the freebies or low interest rates that credit cards offer. They are designed to entice consumers to open an account. Instead of opening more credit card accounts, you should close or cancel the accounts as soon as you pay off the debt. Keep only one or two the most for any purchase that require a credit card. The added benefit is it allows managing monthly payment easier too.

There are a lot of apps out there which will help you manage your finance and expenses. However, I find that most require personal information and require a considerable amount of time to manage all the inputs. While they may help, I believe the time investment is too high to worth the effort.

There is no real magic bullets when it comes to managing finance. Reducing debt simply falls into two main categories, avoid temptation and be discipline in paying any outstanding debt as soon as possible.