4 Lessons About Getting Out of Debt From the U.S. Government

David Bakke managed to climb out of $30,000 in personal debt, and now shares his story and personal finance tips on Money Crashers.

The United States is currently $15 trillion in debt, and this amount increases by approximately $4 billion per day. These staggering statistics make it seem as though there is no end in sight.

You don't need to look any further than our federal government to realize the importance of getting out of debt. Fortunately, you can learn from our country's financial mistakes. Adopt a few basic financial concepts, and you can solve your personal debt problems. The sooner you begin the process, the better off you'll be.

Steps to Get Out of Debt

1. Commit to a Budgeting Plan

   It often seems as though the federal government prefers to argue about the country's debt rather than fixing the problem. We will not see any significant change in our country's debt problem until politicians commit to a plan. The same applies to you and your personal finances.

   At one point in time, I had more than $30,000 in personal debt, a seemingly hopeless situation. As I grew increasingly weary of the stress caused by my unpaid bills, I finally decided to put together a comprehensive plan to get out of debt for good. Eventually, I emerged debt-free, but to eliminate my money woes I needed to firmly address each of my financial issues including overspending, reducing my expenses, and generating additional income.
   

2. Spend Less Than You Make

   The federal debt increases at a clip of $4 billion per day, as the government spends more money than it brings in. Don't repeat this mistake in your life. Spending less than you make allows you to free up revenue to put toward paying off your debt.

   Make a personal budget to track your earnings and expenditures. Take some time to write out what you spend each month on groceries, all major monthly bills (including utilities), and an estimate of how much money you need to set aside for discretionary purchases.

   Compare this total to how much you make each month. If you currently spend more than you make, you need to immediately find ways to cut back.
   

3. Cut Spending

   The federal government could eliminate plenty of unnecessary expenditures, but they seem reluctant to do so. However, you should immediately identify nonessential expenses you can cut out of your own budget.

   Begin by reviewing all of your monthly bills. First, check for any unnecessary fees and surcharges. For example, if your bank charges a monthly fee for using a debit card, find a different bank such as Ally Bank.

   Next, see if you can save money by eliminating any extras - or "pork" - from your monthly bills. Consider switching to a cheaper satellite or cable TV package, or eliminate this service entirely. You may also be able to save by utilizing a cheaper cell phone plan. Consider switching service providers if you can't find a way to reduce your monthly bills. Even if you only save $10 per month on one bill, that translates into $120 every year.

   Lastly, be as objective as possible to determine your needs and wants. You only need a roof over your head and food on the table, and while you don't have to take such a harsh stance on your own situation, keep it in mind when you feel the urge to purchase new household goods or electronic devices. Eliminate as many wants as possible until you get your finances back on track. This temporary measure goes a long way to free up cash to put toward your overall debt balance.
   

4. Generate Revenue

   When the government references "revenue generation," it is essentially a euphemism for "raising taxes." Since you don't have this option, look for creative methods to generate revenue to help eliminate debt.

   You can earn extra income by finding unused items around your house and selling them on the Internet. You may even decide to start your own business - identify your talents, and turn them into a money-making opportunity. For instance, I partnered my knowledge of small electronics with my keen business sense to launch a reselling business. Generating this additional revenue helped me pay off my debt, and begin saving for the future.
   

Final Thoughts

It might seem odd to compare the country's debt to your personal debt until you examine the reasons why debt accrues. Then the parallels seem obvious!

Develop financial habits to pay off your debt and to stay out of debt permanently. You may initially feel overwhelmed and believe you cannot eliminate all of your debt. However, if you stick to your plan and persevere, you will start to see a significant reduction in the amount of money you owe. Once you eliminate your debt problems, continue to follow these same principles to ensure that your personal economy is healthy, thriving, and built for the long haul.

What other advice do you have for getting out of debt?

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