Personal purchases. Mortgage payments. School tuition. Medical Emergencies. Car payments. These are just some of the many reasons we accumulate debt, and debt isn’t something that generally brings good news.
Having a large amount to owe restricts our movement and brings down a gray cloud over our heads. It’s not something that we hope for but something we wish to go away, and it’s not something easy to get rid of. Below I’ve included some ways you can kick your debt to the curb.
Make Sacrifices
In order to be able to lessen the debt we have, we first need to accept that we’re going to have to let go of some luxuries. For a short amount of time we have to refrain ourselves from spending money on things we don’t necessarily need, whether it’s going to restaurants, watching movies, buying clothing, etc. We have to understand that this is only going to be for a temporary period until we’re able to pay off what we owe.
Take note and make a list of all the things that you generally spend money on and start crossing things off you don’t necessarily need. Yes, you’ll be going back and forth whether or not they’re important, but just ask yourself if it’s something you need to survive. It’s an extreme question but it’s an easy one that’ll help you decide.
Make a Plan
If you go into a business not knowing what to do or where to go then you’ll be wandering aimlessly. This is the same when trying to pay off your debt. If you don’t know what to cut off or where to get the money, then you’ll continue to add on to your debt.
Making a plan or making a budget will help you stay on top of it. It’ll help you see how much you’re spending and how much you’ll have left to spend. In this step you’re able to dictate how much you can contribute to what you owe, and there are various strategies that you can use. Such as the 50/30/20 rule.
In the 50/30/20 rule you can spend 50% of your income on your essential expenses, 30% on your wants, and 20% towards your financial goals of which debt falls under. This is a great method to follow as it still allows you to spend money on what you want, and not forcing you to let go, cold turkey.
Pay of the High Interest
If you have multiple bills needing payment, one way to figure out which to prioritize is to look at the interest rates. This method is known as the debt avalanche method. In this method you’ll focus on the debt that carries the highest interest rates because the fees will begin to add up and it’ll feel like you’re drowning. Through this strategy, you’ll pay more than the minimum on the high interest cards and pay the minimum on the others.
To begin, start listing all your debts, their current balances, minimum monthly payments and their interest rates. Then order them by their interest rates and calculate how much you’ll be able to put into each card. This’ll allow you to lessen the amount of fees while lowering your balance on one card.
Avoid Using your Credit Card
Credit cards are just a giant pitfall. Since it allows you to pay it back at a later time you tend to keep tapping it. Disregarding how much you’ve actually spent. Since you don’t notice the balance going up every time you use it, it gives a psychological effect where you’ll just continue to spend and spend.
To start off, put that card away, far from sight to where you won’t be using it anytime soon. Instead what you can do is use cash. This way, you have a better awareness of how much you are spending and are less likely to over spend.
Be Patient
Debt is not going to go away easily. If you consider that you have to buy essentials like food, water and shelter, you cannot put all your money into your payments. Meaning you’ll have less to contribute and it’ll take longer to pay off. But don’t worry this is normal. This is where you need to be patient because it’ll take time. It is important to not rush or give up along the way as this is a challenging mental hurdle that you will have to face.
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