Are you struggling with debt and don’t know how to get out of this awful situation? The truth is, we need money to survive and to provide for the needs of our family. That’s why there are so many banks and other financial institutions that offer loans for “our convenience”. Most of us have already applied for them, whether it’s a student loan, mortgage, car loan, credit cards, etc. Whatever the situation, the bottom line is we need money.
Paying down your debt can be a pain as you may keep on thinking of the payment month after month. Perhaps, you’ve experienced late payments, repayments, and your balance statement growing rapidly.
If you want to get rid of your debt, you should start by applying a series of specific approaches that could help you become debt free.
This process is not easy. It requires tremendous effort and discipline but it’s always worth it in the end. If you are ready to get out of stressful debts, here are some practical tips that may help:
1. Set Goals
Getting organized is key to successful living. Start by evaluating your financial situation and planning the ways to pay down your debts. If you are paying multiple credit cards, prioritize to pay the most important one. Setting your goals must be a realistic process and you should stick to your plan. This will keep you motivated, allowing you to have a clear picture of what you want to achieve.
2. Avoid Credit Card Temptation
If you really want to be debt – free, you must put your credit cards away. Go ahead and remove them from your wallet and make sure to place them somewhere else to avoid getting tempted. It will be difficult for you to attain financial stability if you are still standing on credits. Paying your purchases on credit instead of cash will just bury you deeper in debt. By keeping your credit cards out of sight, you will learn how to be cautious about your needs and wants and be wiser when it comes to spending.
3. Evaluate and Prioritize
Create a list of all your debts, including the interest rates, fees, and outstanding balances associated with them. After writing them down, ask yourself what needs to be paid off first. From a smart perspective, you should pay the debts with the highest interest rates first or the most essential ones such as vehicle and mortgage loans.
4. Cut Your Expenses
Save. Save. Save. Instead of eating out with your friends at a local restaurant, opt to prepare and cook at home to save money. Even brewing your own coffee instead of buying it could save you at least $1000 a year! Don’t get jealous of your friends if they got a new expensive and branded pair of shoes. When you have bills to pay, practicality is vital. You can buy everything you want when your debt is gone.
5. Create a Budget Plan
Determine your monthly income. From this, subtract all your expenses such as groceries, rent, transportation, and utilities. After allocating a budget for the mentioned essentials, the rest will be used to pay off your debts. This can be hard in the beginning especially if you get used to a lucrative life. But doing so will give you more opportunities to reach financial freedom. You only have two options: have an airtight budget or borrow money again and be devoured by more debts. If you are really committed to making your debts disappear, let go of your social life and live below your income. Suffer now. Enjoy later.
6. Refinance your Mortgage
This is a common strategy used by homeowners to trim down their credits and pay off debts. When done correctly, there are great benefits. Of course, it can be extremely stressful if you have many bills piling up on different due dates of the month. By refinancing your mortgage, you can free extra funds since mortgage has lower interest rates compared to other types of debts. Also, you don’t have to worry about paying multiple bills because you’ve combined them all in one payment.
7. Pay Strategically
Now that you have prioritized your debts, it’s time to pay them strategically. You can do this by either paying for the debts with the highest interest first because they can grow faster and bring a devastatingly negative effect or pay the debts with the smallest balances. Another proven tip is to pay the ones that are on fixed monthly payments such as car loans, mortgages, and term loans.
Then, start on making minimum payments on your credit cards with low – interest rates and a maximum payment for those who have the highest interest rates. It all boils down on your attitude on payment and how motivated you are to get rid of your debts.
8. Communicate with your Credit Card Provider
Your credit card provider or your loan advisor can be just one call away to help you with your financial problems. If you are struggling to meet the due date and failing to make the required payment, you can ask for other options that would benefit both you and them. By letting them know your financial situation, they will help you by offering lower interests for a certain period and give you enough time to settle everything.
9. Debt Consolidation
Debt consolidation is a method of combining all your multiple credit card debts, bills, and high – interest loans into one monthly payment. Doing this can save more money on interest, lower the interest rates and help you pay down your debt faster.
It’s also a good option to transfer the balances of your credit card to another credit card with a lower rate. Through this, you can have a breathing room and increase your chances of paying off your debt.
Although getting out of debt is never easy, when you put into application the plan above, you may finally be able to become debt free and live without thinking of how to keep paying your loans and bills!
Focus on your goals, be motivated, and take action with consistency. With enough determination and discipline, you’ll be surprised at what you can achieve.