If you are in debt, it can bring stress into your life. Regardless of your situation, you are bounded to pay back a loan which you have signed for. This means that even if you are in a dire circumstances like getting fired from your work, met with an accident or maybe you are expecting higher spending due to a newborn child, you still have to continue to repay your loan.
At times, debt can occur with a little oversight of spending for that well deserved holiday trip, a little self pampering or just doing too much pub hopping. It seems that many people gave up in getting out of debt as life keeps throwing curve balls to them. But this doesn’t have to be the case. Every single day there are people just like you who managed to get out of debt. And sometimes they got out of debt very quickly.
So if you are ready to put your mind into getting out of debt, let’s talk about some practical ways that can help you achieve a debt free life!
These are 5 Easy Ways that Can Help You to Get Out Of Debt Quickly
1) First Make a Power full Choice Not To Borrow Money Anymore.
If you want to quickly get out of debt, first we need to ensure that you don’t take up more loans especially to support a fancy lifestyle. This will mean that you should not sign up for more credit cards, buy or finance things for the house, buying things that you don’t need (like a brand new car). Only then can you create a feasible plan to payback existing debt that you have.
2) Save up enough cash reserve to act as an emergency fund
We don’t want to be in a situation where we are caught in a difficult situation and do not have any money to pay for it. Usually if this were to happen, most people will just use their personal credit card to be the funding source to help them get our of such situation. We want to ensure that you have sufficient cash to prepare for such occasions.
3) Plan out what is a budget that is suitable and stick to it to the last penny.
Set a realistic budget that tracks your Income and Expenses is a fundamental step to get yourself out of debt in a short amount of time. Having a good idea of your finances will make you more savvy when it comes to eliminating debt.
Also a good budget will also inform you on how much money you have left over that you can use to finance the debt. In short, how much surplus can you create to pay off your debt or are you in a deficit where you need more money then you actually have? There are actually just two ways to do this:
- The primary way is to earn more money. If you are currently in a job that pays by commission, then it might simply means to clock in more sales, or dedicate more time to work on it. If you are in a job where you have a fix salary, and if there are no overtime income option, then you might want to consider taking up a second job. You will be surprise at how much a little more cash from a second job can help with your current lifestyle.
- The second way that you can have more surplus cash to repay your debt is to trim your expenses. To live below your means. Go over each item that you have set a budget for and starting asking, “How can I make this amount smaller?” Sometimes it may just be as simple as to cancel services that you rarely use, like a gym membership, a magazine subscription, cable TV etc. The amount you reduce will be determined by how much you desire to get out of debt. Pain of staying in debt verse pleasure of enjoying these small perks. The more determined you are, the easier it is to give up some secondary or even unnecessary expenses in your life. Or if you still want to have these perks, try checking out if you can get these items or services for a better price, often there might be new discounts or a competitor came along to often a better package.
High Intensity High Impact Debt Elimination
Sometimes it can be very daunting to eliminate a huge debt that you have. There are a few approaches that are worth considering. One of the approach to tackle debts is to list your debts amount from smallest to largest regardless of the interest rate. This method focusing on building momentum and build a habit of repaying our debt. As you start to clear off line by line of debt, it refreshes the mind and give ones the confidence that as long as you have a plan and stick to it, you can get out of debt.
However, sometimes certain debt have very high interest rates. If you have a few of these, I recommend that you list down your debts in the order of the ones that have the highest interest rates first at the top and start clearing those first. This is the method that is most cost effective as you will save the most money overtime as you it usually means that you are paying less on interest and more on the principle sum.
And the method that I recommend and personally use is the High Intensity, High Impact method. List down your debt in the order that has the most impact if you clear them first and that are the easiest to handle. For example you might wish to pay off the debt to your 80 year old aunt who needs the money for some medical expenses, or your clients if you are in business as you want to maintain a good long term relationship. The purpose of this way of eliminating debt is to give you the ease of mind. You know that your financial situation shouldn’t cause inconvenience to important people and connections in your life. Working on these usually give one the sense of fulfillment after clearing the debt.
There are some differences on the method that you choose, but at the end of the day the important part is choosing a method and sticking to it. Get the ball rolling and it’s momentum makes it easier to keep going.
One thing to note on clearing the debt with the highest interest rates. If you are paying for credit cards, put in as much money as you can at the end of each month to clear the cards that has the highest interest rate while still maintaining the minimum payment on the other cards. When the debt of the first card is paid off, move to the next card with the next higher interest rate to clear all of the cards eventually.
I will recommend that you reduce the number of credit cards even though some may tempt you with exciting promotions and discounts. That being said, it is important that you do not close the account immediately once the debt is paid off from that card as that will damage your credit rating. Just let the account sit for a while at 0 balance.
And if you have one or two small debts that you can clear off immediately, do those first to take your mind off them and then start to handle those cards with the highest interest rate.
All remaining cash at the end of the month should be use to clear debt
Sometimes good things do happen in life and some extra cash comes our ways like tax refunds, selling of your car, getting a winning ticket, payment of a old loan by your friend etc. Although these are not factor into the repayment of your debt, we need to use this extra cash to pay off our debt. The faster you can put in money to clear off the debts, the sooner they can disappear and the happier you can become.
Bad debt shouldn’t be made to last forever. With the right strategy and the commitment to stick to the strategy, you are on your way towards living a debt free life!