This is a guest post by Julia Martin with information on how to avoid debt and how to get out of debt.
Getting Into Debt
When it comes to your finances, one of the difficult situations is being in debt. No matter how small or large the debt is, it is always at the back of your mind, occupying every thought.
Unfortunately, investing and saving is difficult when you are in debt. In fact, a major factor contributing to people’s lack of financial comfort and independence is debt. It’s important to learn and fully understand how to avoid getting in debt and how to get out of debt as soon as possible.
First, you need to be very well motivated to get out of debt. Not only would it remove a huge financial burden, but also would ensure that you can focus more of your time and mental energy into thinking about how to earn more and invest properly.
Here are some steps on how to manage and get out of debt as easily as you got yourself into them.
How to Manage Your Debt and How to Get Out of Debt Quickly
Understand Your Debt
Before getting into debt – whether it is a bank loan, credit card payments, or even just a loan from a friend, you must fully understand just how much you will be collecting. If there are charges and interest rates involved, then you must also understand these, and make sure all of the terms are stated clearly. Paying off your debts is harder if you do not have the precise, correct information on just how much money is involved. Knowing how much debt you have will allow you plan your payments properly, and structure a payment plan.
Pay the Most Important First
If you have a loan from the bank, for example, it is definitely more pressing and important to pay it off quicker than the $50 you borrowed from your friend last week. You also need to put into consideration the interest rates involved with each debt. This is where understanding your debt also comes in handy. You need to categorize the debts according to their level of importance, and then, decide which debt to pay off first. This will make it easier in the long run, and focusing on one debt to pay off first means that it will ultimately be cleared quicker, and there are less chances of forgetting that a payment deadline is looming close.
Live Within Your Means
While already in debt, the worst choice you can make is taking another loan to pay off a standing debt. Also harmful is making outrageous purchases with your credit card. You are going to increase your debt even more and eventually have to pay it off. By reducing the money you spend on miscellaneous items, you have more to channel towards paying off your standing debts. You could even decide to veer on the side of caution and eliminate all temptation by putting your credit card in a safe place for a while. This way, there will be no handy credit card to whip out once you see an eye-catching item that will increase your debt.
Create a Plan of Attack
You’ve been reading all these steps and it all seems fine and easy, but now you’re wondering “how on earth do I get the money to get out of debt?”
Getting out of debt can be easier than you think. First, by eliminating your credit card spending, you’re actually going to save more money than you think, as there will be less impulse buys. Also, you can create a spending plan, which may seem extremely boring, but will pay off literally in the long run. Basically, you map out how much you can spend each week/day/month, and allow the tiniest room for miscellaneous. In addition, you can save money on little but expensive everyday bills like car insurance, gas money, and cell phone bills.
Another method is to expand your earnings by making some extra cash. Having an extra $1500 each month will definitely go a long way in clearing off your debts.
You can earn extra money by working towards a raise at your workplace, getting a side job in addition to your daytime job, or investing in a profitable and growing online business.
Whatever choice you make, the money earned will ensure that you get out of your debts quicker, which will ultimately be one of your best decisions.
