How to Get Out of Debt Quickly
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Table of Contents
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.
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 payment, 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 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.
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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. Or you can pursue a side hustle.
The money earned will help you get out of your debts quicker.
Make a budget
Start by listing everything you owe. This is one of the most difficult parts, as many of us feel guilty about having debt in the first place and try not to look at it as much as possible.
But, if your loans and bills are mounting, then ignoring the problem isn’t going to make it go away. Be honest with yourself, sit down and draw up a list of everything you owe and then make a budget for your monthly expenditures.
Be honest about paying things back
Once you’ve made your budget, and worked out what you have leftover each month after paying your non-debt bills i.e. groceries, entertainment, gas, then you should have a clearer idea of how much you can afford to pay off your debts each month.
Save money where you can
If there are at home solutions, and things that you can DIY without spending a ton of cash, then have a look into them. From making your own lunches to mixing up cleaning solutions, you can save money on a daily basis.
Are there subscriptions that you just aren’t using? Lots of us have a few dollars here and there disappearing from our bank accounts, so have a look at your statement to check if there’s anything you can cut back on.
Make more money
If your monthly paycheck isn’t covering things, then it might be time to look into ways that you can make a bit more money to go into paying off your debt.
One great way of bringing in a bit of extra cash is to become a tutor. You can work from the comfort of your own home, fit hours around your own schedule, and bring in some extra dollars.
You can teach any age, so you don’t even necessarily have to be good with kids to make this work for you.
Make sure you do as much as possible to curb your spending habits, as this is one of the best ways of being able to get debt-free right now. We spend so much money buying things we don’t really need, and this can be something you put into practice right now.
Try to do as much as possible to work on cutting back on your spending so you can free up more cash on a weekly basis.
Reasons to Make Getting Out of Debt a Priority
#1: You will have more money for your savings
You will struggle to save money when you’re paying off your debts each month.
You won’t be able to save for a new house, a new car, a family holiday, or anything else that might be on your life bucket list. Instead, you will lose money with all of the interest that comes with them.
However, when you are free of your debt, you will have more financial freedom to do what you want in life, and you will be happier and more content as a result.
#2: You will get out of the debt trap
If you don’t have any money to put into an emergency fund, you won’t have the finances to rescue you when disaster strikes.
Your car might break down, for example, or there could be an issue with your home. You might then take out another loan to cover the expenses associated with the disaster that has befallen you, and so your debt problem will worsen.
However, if you can clear your debts, you will have more money to put aside, and you won’t have to rely on loans or credit cards to get you out of trouble.
#3: You will increase your credit score
Your credit score is negatively affected when you have too much debt, especially if you have defaulted on any of your payments.
You will then struggle to get credit when you’re looking to buy a car or anything else that might be too expensive for you to buy right away.
You will struggle to get a mortgage too, and you might be subject to a higher interest rate for those purchases that you do qualify for because of the level of default risk.
But once you start paying off your debts, your score will quickly improve, so let that be an incentive for you to start dealing with them.
These are just a few of the reasons why getting out of debt needs to be your priority, so let them act as your incentives. Consider debt consolidation, debt settlements, or debt discharge membership programs, and seek advice if you can’t manage your debt problem alone.
When you’re free of debt, your life will be enriched, and you will be free of the stress and worry that comes with your debt burdens.
ChaChingQueen is a lifestyle blog helping you live a happy and healthy life on a budget.