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How To Reverse The Debt Cycle

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What is the debt cycle?

The process of spending more money than you make on a consistent basis that forces you to borrow money each month to reconcile the deficit.

How To Get Out Of The Debt Cycle

  1. Cut up your credit cards. It’s the only way to stop using them. If you eliminate the temptation to use them, you will force yourself to find a way to pay your bills and expenses each month without using them.
  2. Start a written budget. All you need to do is write down all of your fixed expenses and make a good guess at your variable expenses. Then, figure out all of your income for the month. If you didn’t overestimate your variable expenses and you see that you still don’t have enough income to support your expenses, then you might have an income problem. Read more about budgeting
  3. Break your bad spending habits. Are you constantly eating out for lunch? Do you go overboard at the grocery store? Do you have more clothes than you know what to do with? Do you buy the latest gadgets when they first come out? Then, you could be a spend-a-holic. Print out your last three months of bank statements, and write down all of the purchases you made that you could have done without. This is not just a step to take. It’s a lifestyle and habit you must consciously work to change.
  4. Ask For Help.

Seek out a couple, friend, or family member you know that is winning with money. Ask them to keep you accountable about stopping the debt cycle. It helps to know that someone is going to ask how you’re doing every week.

Stopping the debt cycle is the first step to getting out of debt. You need to stop the bleeding before you can think about your plan to get out of debt. Everyone has a turning point when it comes to winning with money, and getting mad about being trapped in the debt cycle is usually the beginning of that turning point.

Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.