Being in debt is never an enjoyable experience, but it’s something that far too many people face at one point or another. After all, loans, credit cards, and other expenses can make it difficult to live debt free, but just because it’s difficult doesn’t mean it’s impossible. If you are struggling with debt, it’s time to pull yourself out from under the financial burden. Instead, use these five tips to help you get out of debt.
Create a budget
In order get out of debt, the first thing you need to do is create a budget. There are many different ways to create a budget, so you need to find the method that works best for you. Basically, no matter what method you use, you will need to do the following: list your expenses and list your income. This will help you see what you have coming in and what you have going out. From there, you can create a budget that will allow you to pay everything on time and use your surplus to pay off existing debt.
Pay down debt
In order to get out of debt, you need to start paying it down. One of the best ways to do this is with the snowball effect. Make a list of all of your debts in order from smallest balance to biggest balance. Then, write down what you typically pay toward that debt on a monthly basis. Adjust your budget (if necessary) so that you can make a bigger payment toward the one with the smallest balance in order to pay it off sooner. Once you have paid that one off, roll that payment into the payment you make on the next loan/credit card. Continue doing this until all of your debt is paid off in full.
Don’t take on other debt
In order to get out of debt, you need to eliminate the appeal. For instance, while you’re working on paying down debt, don’t take out a car loan or open a credit card. This simply creates more debt. Instead, once you pay off your debt, start putting that extra money into a savings account. This way, when you want to buy a car, you can do it in cash instead of taking out a loan. Keep in mind that it is okay for you to keep your credit cards open, but put them in a safe place so that you’re not tempted to use them except for emergencies.
Find ways to save
For most people, the hardest part about paying down debt is finding the extra money to get it done. Unfortunately, most people live paycheck to paycheck, and extra money isn’t easy to come across. However, this simply requires you to get crafty. For instance, can you take on a part-time job and use that paycheck solely to pay off debt? If not, try to make extra money in other ways. For instance, see if you can cut down on your expenses, such as switching to a new car insurance company with a lower premium or reducing your cable package. Switching to a company like Mercury Insurance could end up saving you a few hundred dollars a year, and eliminating pay channels from your cable package can also save you come cash. Anything you can do to save will help you climb out of debt.
Getting out of debt isn’t something that you can magically do overnight. In order to help you get out of debt, you should look to lower monthly payments by reducing your interest rate. This can be done by refinancing loans, such as an auto loan or a mortgage. When you do this, you can either use that extra amount of money you save to put towards other debt, or you can continue paying the same amount to reduce that debt more quickly.
Living with debt may be stressful, but if you use these tips, you will have an easier time climbing your way out of debt and into a more financially secure future. When that happens, the only stress in your life regarding money will be choosing how to spend it.
Brian is a Dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013. Who, with his family, has successfully paid off over $100K worth of consumer debt. Now that Brian is debt free, his mission is to help his three children prepare for their financial lives and educate others to achieved financial success. Brian is involved in his local community. As a Financial Committee Chair with the Board of Education of his local school district, he has helped successfully launch a K-12 financial literacy program in a six thousand student district.