We can all agree that being in debt is the absolute worst. It can cause constant stress and affects both your home life and your work life. It’s also the most common roadblock that prevents you from living a fuller life because it prevents you from being able to enjoy yourself, while keeping you in that constant loop of worry that involves how you’re going to pay off creditors, save for a new home, support your family, and make ends meet. But while it may seem hopeless right now, there is a way out. We’ve included several debt management tips that can help you to expertly navigate your way out of debt. Keep in mind that you won’t be able to get out of debt overnight, but by making some important changes in your spending habits and cutting out unnecessary costs, you’ll be on the right track to a debt-free life, so you can finally sit back, relax, and enjoy the little things in life.
1. Learn exactly how much debt you have
While this may sound simple, for many people, learning exactly how much debt they have can be incredibly hard. This is mainly due to the feelings of guilt people have about their debt. It makes them take a close look at where they went wrong with managing their money, but for many people, this is the wake-up call they need.
Title loan companies and credit card companies want you to hide from your statements every month and blindly send off the minimum payments, falsely thinking you’re slowly but surely getting out of debt. But the reality is, making just the minimum payment every month is exactly what’s halting your progress.
Instead of hiding from it, you need to own your debt. Go through all of the account statements, call every company, and basically, do whatever it takes to figure out how much you owe. This can help you to determine exactly what you owe and what the interest rates are.
2. Determine who to pay first
Once you know how much you owe you’re now ready to handle your debt. In order to do this effectively, you’ll need to prioritize which debts you must pay off first. This is done based on the interest rate. Once you’ve lined up your accounts and determined the order in which you’ll pay them off, you’re now ready to come up with a plan of attack.
3. Avoid Temptation
As you focus on paying off your debt, you can’t keep using your credit cards, otherwise, you won’t see any progress. If you have several credit cards, get rid of all but one or two. We recommend keeping one in case of an emergency. Once you ditch the credit cards you’ll be more focused on chipping away at your debt.
4. Negotiate for a Lower Interest Rate
Negotiating for a lower interest rate can actually help you to save thousands of dollars. Through simple negotiations, you can lower a credit card’s APR, which, in turn, will allow you to pay off your debt that much faster. Explain to each credit card company that you’d like to start paying off your cards more aggressively and would like them to lower the card’s interest rate. You’ll have to be a little strategic here, considering most credit card companies won’t be exactly dying to lower your interest rates. We recommend explaining that you’ve received offers from other credit card companies that are offering lower rates. Let them know you would like to continue your relationship with their company, but if they’re unable to work with you when you’re planning on closing your account with them once your card is paid off. You’ll be surprised at how quickly they’re willing to work with you to reach a more agreeable rate. If this fails and you are facing financial hardship your next step is to contact a debt settlement company like National Debt Relief or Accredited Debt Relief.
5. Determine how you’re going to pay off Debt
If you’ve followed the previous steps, you may start to worry about how you’re going to come up with the money to pay down your debts.
First, you can use the money you’ve saved by lowering the interest rates on your card. You can also spend time going over your monthly expenses and determine what you can cut out of your budget. As an example, if you find that you eat out four or five times a week, reduce it to just one night. Your entertainment budget will also suffer, but these are things you can do without until you’ve managed to pay down your debt. Do you go to the movies every weekend? Shoot for once or twice a month. Look at other household expenses such as cable. While enjoying a variety of cable channels can help you save money that’s otherwise spent at the movies, you’ll need to make this type of sacrifice until you’ve whittled down your budget.
You should also assess expenses such as car insurance, hobbies, and cell phone.
Saving money on everyday items can be an easy and efficient way to free up your hard-earned cash and put it towards paying off your debt.
Figure out how you can earn more money. Speak with your employer regarding a raise or the possibility of working overtime.
Once you have eliminated your debt, you’ve not only beat the system, you’ve also gained powerful knowledge and skills that you can use on your path towards a fuller, richer life.
For those of you who are juggling a lot of debt, you can also consider debt consolidation programs. Learn more on how debt consolidation works.
6. Stop Borrowing Money
If you’re trying to get out of debt, you have to stop adding more debt. This means no more signing up for new cards, no more financing furniture, no more window shopping for a new home or car that you don’t have money to pay for. This will help you focus only on the debt you currently owe.
7. Create an Emergency Fund
An emergency fund can be important, especially if you don’t have money in the bank. Most people use their credit cards in the event of an emergency. But if you’re trying to get out of debt then you have to put a buffer between you and your debt. This is what an emergency fund can do.
Effective Tips to Cut Monthly Costs
Aside from cutting monthly expenses, here are some other tips you can use to save more money that you can put towards your debt.
• Do you enjoy reading and find yourself hitting that buy now button on Amazon for your Kindle books? Try visiting the library instead.
• Plan out your grocery trips instead of allowing your stomach to guide you.
• If you normally spend two or three hundred dollars a month on golf, cut that cost in half.
• Get rid of all the stuff you no longer use and put them on Craigslist or eBay.
• Set a monthly budget and stick to it.
• If you’re married, merge your bank accounts.
During your journey to become debt free, there will be plenty of times when extra cash will fall into your lap. Use this cash to tackle your debt. The more money you put towards your debt, the faster it will disappear. Debt doesn’t have to be forever. Create your financial game plan, make cuts where you can, practice discipline with your spending, and you’ll start to make some serious progress.