Are you experiencing financial difficulties and have an outstanding debt? Are you staying awake late at night, wondering how to get out of this uncomfortable situation and stressing over your budget? If you are having such problems, then you are in a position where the more you sit on it, the worse that situation is going to get. Keep in mind that nowadays, there are many people struggling with debt and are looking for the same answers as you are. Regardless of what type of debt you are carrying, whether it is credit card debt, a student loan, car payments or some other debt type, your goal should be the same – to get rid of that debt once and for all. Even though getting rid of debt is not an easy thing to do, with the right attitude and commitment, that goal is quite reachable. To achieve a life free of debt, you would need to set your priorities straight. That means making your debt repayment your number one priority. Below, we are going to give you some ideas on how to tackle your debt so that you would be able to get rid of it as fast and efficiently as possible.
Organize your debts
We often try to avoid thinking too much about our debt bills and just try to somehow deal with them. However, as with many things in life, unless you actually pay attention to the details, you are not going to make the most out of anything. Same goes for debts. If you take the time to list your debts and think about the ways you are going to approach the repayments of these debts, you will be in more control over your finances. By organizing your debts you would be able to see results faster, which will naturally keep you motivated to reach your end goal. There are two main ways which you can tackle your debts:
- You can list your debts by starting from the smallest one the largest one. By always focusing mainly on your smallest debt, you would be able to deal with that debt a lot faster, which will lead to you having one less debt to repay. Seeing how you are having less and fewer debts to repay will give you all the momentum to continue giving 100%. Repeat that strategy until there are no more debts left for you to repay.
- The second method for tackling debts is by listing them from the one with the highest interest rate to the one with the smallest interest rate. The debt with the highest interest rate is that one that you are spending most money on each month. By getting rid of that debt first, each debt that follows will feel a bit easier to repay. Being able to deal with the most costly debt first, will give you the confidence that you can actually get rid of all your other debts and finally regain control of your finances.
Create a safety fund
Whether we like to think about it or not, an emergency expense is always on the way. As you may already know, unexpected emergency expenses are one of the main reasons for people to go into debt. When you are already repaying multiple debts, facing an emergency expense could really make your life a living hell. There is only one way to prepare yourself for such expenses, and that is to create a safety fund. Even if you are not able to put a lot of money into it, it is all right. If at the end of the month you have some cash left, your first idea would be to spend it on something. However, if you manage to put that extra money into your safety fund, that decision will prove to be of great importance along the way.
Try to make only minimum monthly payments
As we have already mentioned, in order to deal with multiple debts, it is very important how you are approaching the repayments of these debts. In case you are focusing mainly on your highest interest rate debt, make sure to make only the minimum monthly payments to all your other debts to be able to get rid of that high-interest rate debt as fast as possible. Once you have paid off that debt, move on to the next highest interest rate debt, while still making minimum monthly payments on all of your other debts.
Create a realistic budget and stick to it
If you are carrying multiple debts, the state of the economy and the fact that life is expensive, cannot be the only factors to blame. If you are in this difficult financial stage in your life, you have probably done a poor job in managing your budget. So in order for your journey towards debt freedom to be a success, you would need to change your habits and establish some new ones. The first thing you can do is to review your purchases and see where you have spent most of your money. If you have bad budget managing habits, you would probably need to make some drastic changes in the way you are living. If you are used to eating out at fancy restaurants, hitting the clubs on a regular basis, all of these have to change. Otherwise, you will probably keep carrying debts for the rest of your life. Instead of eating out, get your food from the grocery store and start cooking your meals at home. Instead of going out to different clubs, try inviting your friends over and have a good time watching movies or playing games. Stop spending money on stuff that you do not actually need. Each of these things may not seem like such a big deal, but once you combine all of them, you will see a massive difference in your financial state.
Sell the stuff that you do not need
Try taking a good look at all of your belongings. Over the years, you have probably acquired a lot of things. Some of them you may still use, but surely there are many things that are just sitting in your closet and catching dust. Take all the stuff that you no longer use or need at all, and try to sell them. Back in the old days, you would need to do a garage sale. However, nowadays, there are many websites that you can use to sell all your useless possessions, and use that money towards repaying your debts.
Get a second job
Yes, it sounds scary, difficult and time-consuming. However, getting a second job will improve dramatically your financial state. Even if it is just for a couple of hours a day, that extra money can really help you get rid of all your debts a lot faster. Once you are debt free, you can go back to having just one job and enjoying your free time.