Getting out of debt, is it possible? How hard is it? What do you need to do in order to accomplish it? The answers to these questions are going to be different for every different person. Carrying debt can be a very tough experience. With debt comes a lot of stress and exhaustion. If you are daydreaming about once again living a life without debt, start doing something about it. If fact, there are a lot of things that people can do in order to get out of the debts that they carry. However, there are many people who stay stuck in the same spot for years, not able to reach the point of financial freedom. So if you are constantly stressing over your finances, having trouble falling asleep at night, staying awake wondering how to make your monthly payments, this article may give you what you need. To start taking action, start doing things to make your life better. Of course, what you read here may not be suited perfectly to answer your specific financial situation and that is normal. There are many different types of debt, and each person’s situation is unique. Regardless of what your debt type is, whether it is a student loan, a car repayment, a credit card debt or some other form of debt, ultimately your goal should be the same – to get out of that debt for good. And so, here are some tips and steps that you can follow. After all, you are not alone in this. There are many people going through similar financial difficulties. Just stop worrying about how bad your situation is and start changing it.
Make a commitment
The first step of reaching any goal in life is to have a clear vision of what that goal is and to fully dedicate yourself to reaching it. If you want to get rid of your debts, you would have to make an absolute commitment to that goal, regardless of how hard it is going to be. Getting out of debt is not something you can do overnight. You will not get from point A to point B in a matter of days. You need to be prepared for that. You need to understand the difficulties of the task ahead or you will fail somewhere down the line.
Change your ways
If you have set up your goal and made a promise to yourself to reach it, it is time to dig in. However, before you start making any changes regarding the way you are dealing with your debts, you need to change your way of living. You need to be honest with yourself to see the flaws that got you here in the first place. The truth is that, despite the unstable economic environment that we live in, and how expensive life has become, you were probably doing a poor job at managing your finances to begin with. Your goal should not only be to get out of your debt, but to sustain a debt free way of living for the rest of your life. And that is not going to happen if you continue living the way that got you into debt. You would need to change your habits. Here are some things to think about:
- If you are used to eating out, going to fancy restaurants and clubs, you need to put an end to it, or at least try to limit your outgoings as much as you can. Instead of all that, start cooking food at your home. Invite your friends over to watch a movie or to play a game.
- Stop spending money on things that you do not really need. There are some things that are of great importance to our existence, and then there are things that people tend to buy without really knowing why they do it. If you have several pairs of shoes, do you really need to get another one? Or there is a new TV model 10 inches bigger than the one you currently have, is getting that new one more important than paying off your debts? Even though the answers here are pretty obvious, many people fail to change these bad habits and continue making the same old mistakes over and over again.
- Stop comparing yourself to other people, especially with people with higher incomes than you. You need to realize that if you want to have a stable financial life, you need to stop trying to compete with people who are above your pay rate. Spending money that you do not actually have, buy things that you do not actually need, only to impress people that you do not really care about is only going to take you down and stop you from regaining control over your finances.
Plan your budget
Planning your budget seems like a logical thing to do. However, many people tend to overlook and ignore it. If you want to be on top of your finances, you need to be aware of your income and your expenses. Calculating your future income and expenses will allow you to prepare for these expenses in a much better way. Knowing exactly where your money goes will allow you to minimize your unnecessary expenses and focus only on what is actually important.
Structure your debt repayments
Now that you have taken the much necessary steps to improve your financial management, it is time get rid of those debts and get out of that uncomfortable situation once and for all. In order to optimize your debt repayment process, you should structure your debt repayments. That means you need to list all your debts and start repaying them according to a specific method instead of making chaotic payments each month. There are two main debt repayment structure methods that you may use:
Attack the debt with the highest interest rate
The debt with the highest interest rate is the one you are spending the biggest amount of money on interest each month. What you need to do is to focus your attention on this debt while making only minimum payments to all of your other debts. Once you pay it off completely, move forward to the next highest interest rate debt and keep that going until you get rid of all your debts.
Start from the debt with the lowest amount
Here, instead of going for the debt with the highest interest rate, you start from the smallest debt. By focusing on your smallest debt, you will be able to quickly pay it off, which will naturally give you a confidence boost. You would be able to sustain a momentum all the way through all your debts are paid off.
It is important to keep in mind that none of these steps will do miracles for you. None of them are an instant fix or a magic trick. Getting out of debt can be a real struggle and you need to be prepared for it. With that being said, it is all in your hands. There are many other things that you can do which can help you to get out of debt faster. Keep exploring different strategies but never lose sight of your end goal.