Anyone can get out of debt with the right motivation and tools. Take it from the people who have been there. Some of them dealt with thousands of dollars of debt using everyday tricks and smart strategies. Thus, leveraging the most of their money.
Here are seven tips and steps you can take to get out of your debt. Take a read!
Types of Debt
There are mainly four types of debt in the US, namely, home mortgage, auto loan debt, student loan debt, and credit card debt. Since 2013, mortgage debt has been increasing, yet at a slower pace than the overall consumer debt.
Auto loan debt has started an increasing trend until now, which is good news because this type of loan has one of the lowest interest rates. Moreover, student loan debt continues to rise because an increasing number of people seek higher education.
Lastly, credit card debt has reached 829 billion dollars in 2018, which is a 45 billion dollars increase from 2017.
Set a Budget
As with any financial plan, building a budget is quintessential. Most specifically, when you are paying off debt.
Consider the 50-30-20 budget. Allocate important expenses to fifty percent of your income. Keep your wants to thirty percent of your income.
Then allocate twenty percent for debt pay-down and savings. Because you're engrossed in clearing your debt, you might want to use the allocated money from your "wants" category to make additional debt payments.
It will clear out your debt faster and aid you in saving on interest. You can track your progress once you have your budget. Also, you can automate it as much as possible to set yourself up for success. Moreover, if necessary, you can always make a new budget.
Earn Extra Money
Work some side hustles to earn extra cash. Think of any skills you have like coding or web design. Also, there are other side hustles that you can work from home, such as content writing or selling clothes online.
However, if taking another job is not possible for you, then make it a short-term job to earn enough cash to pay for extra debt payments.
Align your values and spending to avoid overspending. If ever you fall behind on savings goals, breaking your own spending rules and purchasing items out of boredom, then you may be diving into the big-spender territory.
However, you can disrupt the cycle by working on new habits, studying your credit card statements, and by creating an excellent budget. Or to put it simply, downscaling your lifestyle. For example, instead of eating out, cook food at home.
Create a list of all the things you treasure in life and then record all of your expenses from last month. If they don't match, make sure to get your spending to align with your values.
Sell the Things You Don't Need
If you're searching for a way to earn more cash, then it might make sense to sell everything you don't need. For sure, most of us have things that we hardly use and could live without them. Thus, why not put these items on sale and use the hard-earned money to pay off your debts?
A garage sale is typically the easiest and simplest way to unload your unneeded items for a profit. But make sure that the neighbourhood you live in allows it. Other than that, you can sell your items via a Facebook yard sale group, a consignment shop, or through one of the many online resellers.
Have a Clear Motivation
Consider your short-term and long-term financial goals. Whether you are saving up for a rewarding vacation, or searching for a new house, having a clear-cut motivation to pay off your debt will undoubtedly keep you on track.
Perhaps, you'd want to provide better for your family and didn't want to disappoint them. Nevertheless, you will need a comprehensible reason why you'd want to get out of debt since it's going to be tough and challenging.
Most of the time, it'll take sacrifice. Thus, you need to be mentally prepared because when you know your "why," you'll always be motivated.
We are all enticed by something. For most of us, it may be your favourite online store or the local mall. For some, it may be dining in your favourite restaurant. And for those having a credit card for spending, it can be way too much of a temptation.
Regardless of your biggest temptation, it is wise to avoid it, particularly when you are paying off your debt. When you are always enticed to spend, it may be hard to pay off old debts and avoid new ones.
In other words, avoid temptation as much as possible, even if it means avoiding the Internet or taking a different way home. Also, you can hide those credit cards away for the time being and bring them back once you are free of your debt.
Paying extra for your debt payments can shorten the time of your payoff. Also, it can cut down your credit utilization ratio, thus, improving your credit score. Even a tiny additional payment every month could lessen the burden of your debt.
Some people find it easy to live in debt because they never want to deal with the reality of their situation. However, when tragedy strikes, you'll have a new outlook in haste. Whatever debt you are in, it's essential to know that there will always a way out. Although it might not happen overnight, getting out of in the future could be yours if you build a clear plan and stick with it.