Being in debt is stressful and awful. It can prevent you from achieving your financial goals and may even make simple things, like applying online for a car loan, challenging because your credit standing isn’t as great as you’d want it to be.
Fortunately, you won’t have to suffer debt for the rest of your life. The moment you decide to make getting out of debt a top priority, all you need to do is to take the necessary steps and commit to them. So, if you want to get out of debt for good, here are several ways to do it.
Determine the reasons you are in debt.
When you look back at how you got in debt, it can benefit you in a lot of ways. You can change the way you handle your personal finances and avoid the mistakes that got you into financial trouble in the first place.
Give yourself enough time to reflect. While some may suggest it’s not helpful to dwell in the past, you may realise some of the reasons that have caused you to incur debt. Write these reasons down. Think about what you could have done differently. This newfound insight will help prevent you from getting into debt again.
Assess how much you owe.
While it’s obvious, some may tend to overlook this step. Whether you want to do it the old-fashioned way like writing all your debts in a sheet of paper or opening a spreadsheet on your laptop, no matter how you do it, getting organised is crucial.
Make your list simple. Create four columns. Have one column for the name of your credit cards or financial institutions you borrowed money from. Have another column for the total amount of debt, a column for interest rate, and monthly minimum payment. This way, you’ll have a clear view and be able to tackle your debts more effectively.
Start with the highest interest rate.
After you’ve created your list and know exactly how much you owe, you’ll have to decide which loan to pay off first. Whether it’s a credit card or a bank loan, you’ll want to pay down the loan with the highest interest rate first, then work your way to the lowest ones.
If you have some emergency cash saved somewhere, use some of it to pay off the larger debts because the sooner you stop accruing interest, the better off you will be. Keep in mind that if you keep making just the minimum payments, your debt balances will continue to accumulate interest.
Identify your bad spending habits.
Temptation is everywhere. The moment you open your TV or start surfing the internet, you’ll be inundated with irresistible deals, offers and promotions enticing you to spend. But you will never stop accumulating debt if you continue to add more to it. To avoid this, you may have to reflect on your spending habits.
Take a long, hard look at where your money is going. Distinguish what you want and what you really need. It’s easy for many of us to justify our purchases just to gratify our desires. If you are obsessing with a purchase, give yourself a month before deciding whether you want to go through with it or not. Sometimes, it may be just a strong impulse that will eventually subside after a week or two.
Side hustle to earn extra cash.
Maybe you’re good at something like writing or taking good photographs. You can use your skills or talents to earn some extra cash. The free time that you have can be used to do some freelance work like being a virtual assistant.
If you don’t mind taking on a second job, you can rent out any extra space you have in your house or use your car to chauffeur people or deliver items. While they may not seem like glamorous work, remember that swimming in debt isn’t so fabulous either.
Another thing you can do to generate some extra cash is by selling off belongings you no longer need. You may get surprised at how much items you have lying around the house that is in good condition and worth still selling.
These are just some of the ways you can do to get out of debt. While there’s no cookie-cutter solution for all financial problems, hopefully, these suggestions can help steer you in the right direction. Sometimes, a little motivation and direction are all you need to get started.
If you have some debt-reducing tips, we’d love to hear from you. Please share your thoughts by leaving a comment so that others may also benefit.