How To Pay Off Debt When You Don't Know Where to Start

I know how intimidating it can be when you don't know where to start and the frustration really starts to build.This week, we are going to take a look at how we can start paying off debt when we don't know how. The following tips are short but sweet little items that you can take action on today.

Track Your Spending

Like with a nutrition diary, when you start to track your habits, you start to realize what your trends are. By tracking, you are bringing awareness to your financial habits and can start to make small little shifts to bring you closer to your larger financial goals.Take the next two weeks and really track what you have coming in and going out. Focus on what the biggest expenses are and see if there is some way you can reduce what you are spending on them.

Find Out How Much You Really Owe

BBy tuning into how much debt you have outstanding, you can see how long it will take you to pay off the items when tackling them one at a time. There are various calculators out there that provide you with timelines on how long it will take to pay off a debt.When you have your debt from various lenders, it can get confusing as to how much you owe and to whom. I recommend taking a look at CreditKarma or getting a free yearly report from Equifax/TransUnion. If you pull your report from CreditKarma, do not mind the score as it is not the one that the banks use. It is approximate but we are only using it to get an inventory of our outstanding obligations.

Create a Budget

The final step to starting to pay off debt is to create a budget. Budgets are not meant to be restrictions but rather a tool to allow you reach your financial goals. A well-established budget includes some fun spending money, savings, as well as a debt repayment plan.To create a budget that is sustainable, you will need to keep in mind:

• There should be a balance between debt repayment and savings
• Budget your necessities first (housing costs and food)
• Pay yourself as well

By completing the above items, you can take the steps you need in order to start paying off debt and making your way to becoming financially free.Next week, we will start delving into creating a budget and the parts that make it up.I want to know in the comments below, what tip will you take this week?P.S. If you haven't grabbed your free monthly business tracker yet, you can do so here.