This simple guide is designed to help you finally get out of debt.

The average American carries $8,000 in credit card debt. If cards are paid off using the minimum payment option, $8,000 can take 20+ years to pay off. That’s a scary thought, huh? 30 years from now you could still be paying for a dress or iPod that you barely used. This is a harsh reality for many Americans and, chances are, if you’re reading this article, then you’re in debt and are about to face this reality.

One thing to keep in mind, though, is that you control your own future. If you set your mind to it, you can get out of debt. Now you may be asking “how can I get out of debt when I don’t know how?” It’s a question that many people with debt ask. How to get out of debt is often a confusing and long process. In this article, we will be going over, in depth, how to get out of debt so that the process will be as simple and quick for you as possible.

Know Your Options

Before you can even begin the process of getting out of debt, you should first explore all your options so that you can find the method that suits you best. There are generally two ways of getting out of debt without hurting your credit score further:

• Debt Reduction Plan: A debt reduction plan is provided by a credit counseling agency. They will, essentially, take all of your credit card bills and combine them into one or two monthly payments. Additionally, they will negotiate with creditors to lower interest rates. A debt reduction plan is good for those who are unable to figure out how to get out of debt on their own. For more on debt reduction plans, please see our article on them.

• On Your Own: You completely determine how to get out of debt. You’ll create your own repayment plan and possibly negotiate with creditors to lower interest rates. This is the method of getting out of debt which is covered in this article.

Step 1: Stop Charging and Cut up the cards!

The absolute first step to getting out of debt is to quit charging. You obviously cannot expect to get out of debt if you’re still charging. To prevent you from being tempted to charge, you can cut up the credit cards.

Step 2: Look at all of your bills

The next step is to look at every one of your bills. See how much debt you owe to each company, how much interest they charge on the debt and how much the minimum payment is. Create a spreadsheet (perhaps by hand or on the computer) and write all the details associated with each card. This allows you to see exactly how much you owe.

Step 3: Add all debt to see your total debt

It’s important to know the total amount of debt owed so that you can formulate an accurate plan. Add every individual debt together to determine your total debt. This will be the very basis of your plan.

Step 4: Create a budget

Next, you must figure out how much a month you can delegate toward debt. If you don’t know how to create a good budget, it’s time to check out our article on creating a budget. After you’ve gone through that, progress to the next step.

Step 5: Look at the interest rates and balance for each account

It’s time to create a plan to pay your debt off in the best possible manner. Take a good, hard look at the interest rates and balances on your credit cards. Strive to pay off the cards with the highest interest rates and balances, as those are most harmful to your credit report.

Step 6: Phone the credit card companies

A sometimes uncomfortable aspect of getting oneself out of debt is to actually phone the credit card companies. Many people who are in debt shun communications with credit card companies because they think the companies will treat them rudely. However, this is a huge mistake.

Most credit card companies employ workers who are helpful and friendly. Before you make a concrete plan for eliminating your debt, phone the credit card company. Explain your situation (that you want to get out of debt) and ask for a reduction of the interest rate. Most credit card companies are happy to oblige because they will be getting their money back.

Step 7: Re-Evaluate

After you’ve (hopefully) gotten the credit card companies to reduce your interest rates, it’s time to re-evaluate. You’ll want to, once again, pay off the credit cards with the highest interest rates and balances first.

Step 8: Pay more than the minimum on all cards

Paying the minimum, as we already said, can stretch out the amount of time you’ll be paying off the cards. Thus, it’s a great idea to pay above the average on all cards, regardless of how much you may be spending on the higher interest cards. Try to pay at least $10-15 above the minimum on each card.

Step 9: Create a plan

Now that you know how much to pay out to each creditor, it’s time to create your plan. Write down exactly how much you’ll be paying out to each creditor and add up the total amount you’ll be paying to creditors each month. Put this amount down on your budget so that it fits in with all your other expenses.

Update this plan every month with the updated balances and, as you pay off creditors, cross them off their list. This does two things: it holds you accountable and gives you a sense of accomplishment when you successfully pay off a creditor.

Step 10: Make payments on time

Late fees can increase minimum payments and make it that much harder to pay off the debt. That’s why you should do everything you can do to avoid these late fees. Send your money out to creditors a week before the due date on the specific credit card. If it’s not an option for you to send them out that early, arrange to wire the money to the credit card company a day or two before the due date. Doing so helps you completely avoid costly late fees.

Bonus Step: After the debt is paid off, do not get as many credit cards before

Once credit card companies see that you’ve paid off, or nearly paid off, debt, they’ll start sending you a lot of applications for new credit cards. Resist the urge to sign up for every offer that is extended to you, as overloading yourself with credit cards can harm your credit score and cause you to get into debt all over again. Try to limit yourself to two credit cards and you should be fine.

Bonus Step: Request a credit report each year

You can usually request a credit report for free every year. This report tells you about any outstanding debt you may owe, as well as what your credit score is. Knowing your credit score is crucial, so don’t skip this step.