Debt is probably one of most stressful things that a lot of people have to deal with on a day to day basis. If you don’t know how to escape it, debt can really weigh you down mentally and emotionally as well as financially. However, while it isn’t easy, getting out is relatively simple. All you need is to get organised and start paying it off. Easier said than done? Well here are seven simple steps to help you out of debt.
1. Stop It!
When I was in secondary school they never taught us any basic personal finance technique even though that would be a valuable skill to learn. A lot of us are on our own when it comes to learning to handle our money. If you are in debt it is probably because you’ve made a financial misstep. Don’t worry, you are not the first and you won’t be the last. However, the first thing you need to do is to stop digging yourself deeper into debt and the best way to do that is to create a budget and spending log. With these two things you can track your money and find where it is you need to stop spending.
2. List Your Debts
Compile all of your debts into a list. Organise that list based on the interest rates on each one with the highest rates at the top. If you pay off each item starting with the highest rates your debt won’t continue to increase as much with time.
3. Try to Get Lower Rates
First, try phoning your credit card company or bank. Let them know you are having trouble paying off your debts and that a lower rate could really help. It sounds too easy to be effective but sometimes this actually works. If you think about it, they want you to pay them almost as much as you want to be out of debt. If you can’t afford to pay, they don’t get the money. If this doesn’t work try to transfer your balance to another bank if the new bank will give you better rates in return for your business. As in all cases, make sure to read the fine print before doing this.
4. Make Your Escape Plan
Remember that budget you made in step one to figure out where your money was going? Now you are going to use it to plan your debt elimination. Look at all of your month to month expenses. List all of them from most to least important and split them into two categories; wants and needs. Try to cut out or moderate as much as you possibly can in order to free up some of your income to pay your debts. Come up with an amount that you can consistently pay without wavering.
5. Pay Your Dues
Create a payment schedule. The debts you pay each month should include all of the minimum payments on everything you owe so you may avoid late fees. Then tackle the debt with the most interest. The idea is, as you pay off debt you will use the amount from its minimum payments to take on the next debt. So the more you pay off the more money you have to pay off more debt. Ideally, this creates momentum and turns you into an unstoppable force of repayment.
6. Make Celebratory Milestones
In your timeline of payments set up some benchmarks for you to work towards. When you achieve something reward yourself in some way. Make it either something that doesn’t require money or set aside a small amount money for your benchmarks when you make your overall plan.
7. Strengthen Your Will
As this process continues you are more than likely to be tested. Don’t falter. Stay strong and continue along your path to debt freedom. If you are looking at this plan and you think your debt is so overwhelming that not even a sound plan will do much to repay it then you might consider asking organisations like Consolidated Credit. They may be able to help make your debts more manageable.