5 Steps to Get Out of Debt
Get Out of Debt By Following These Easy 5 Steps
Putting off your debts is one of the worst things you can do.
The more you put them off, the larger they tend to become.
Unfortunately, avoiding debts is extremely common.
Sometimes, they seem so substantial that you can’t even think about paying them off.
You claim you’ll deal with them later, but you never do.
Instead, you need to approach debt from a different viewpoint.
Focus on taking small steps to help clear your debt and be in a much better financial position.
This is far easier than you think, and here are our five steps to get out of debt:
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Break large debts into more manageable payments
Paying off a substantial debt can seem almost impossible.
If you’re met with, say, $4,000 of credit card debt, it can be tough to pay off.
As such, you slip into the trap of making minimum payments.
Yes, you make contributions, but paying such a small amount will basically do nothing and cause the debt to last for decades.
Instead, break your large debts into more manageable payments that exceed the minimum.
Then, use this money to pay off a small amount of debt every month.
Instead of focusing on the huge amount you owe, focus on what you can repay.
This helps you get rid of debt much faster than if you pay the bare minimum.
Create a budget
A budget helps you get ahold of your spending habits.
It restricts how much money you spend every week, allowing you to save more.
You’ll be quite amazed at how different your spending habits are when you have a budget.
It could allow you to save hundreds of dollars per month, all of which can go towards paying your debts.
Some people are scared by budgets as they can be too restrictive.
You don’t have to wallow in poverty to save money.
It’s just a case of creating a plan where you avoid spending copious amounts of money on needless things.
What’s more, a budget can help you prevent further debts.
A key part of a budget revolves around paying your bills.
You make sure that you have enough money in your bank to make all the essential bill payments.
In turn, this prevents you from missing payments, which can then lead to more debt and extra charges.
Keep track of your expenses
This goes hand in hand with your budget as it helps you keep tabs on your spending habits.le
When you start tracking your expenses, you will soon see where a lot of your money goes.
We know there are plenty of great apps out there that help you do this, one of which is Yolt.
Other apps are available, but this one lets you see where your money goes based on different headings or groups.
For example, you see all of your individual payments, but there’s also data on how much you spend on groceries, coffee, bills, etc.
It’s an excellent eye-opener to show you some bad spending habits.
Keeping track of your expenses can help you form your budget.
You will quickly learn where most of your money can be saved.
It’s also a way to assume personal responsibility for your financial situation.
You can manage your spending habits more effectively, reducing expenses and saving more money to contribute to your debts.
Make more frequent debt payments
It’s common to think that all debts are paid on a monthly basis.
This is usually the case, but it’s not a strict rule.
Normally, this is only done as it is the most convenient method of payment.
In many cases, you can contact your creditors and ask to change to more frequent payments.
They’ll be more than happy to oblige as it means you pay them more often.
So, you go from monthly payments to weekly or fortnightly payments.
The benefit of this is that you can clear your debts a lot faster.
If you have the capacity to make frequent payments, then do it.
It will lower the impact of interest rates on your debts as well.
Think about it, the longer you go without paying a debt, the more time it has to gain interest.
Lower your interest rates
Speaking of interest rates, they are one of the biggest reasons people stay in debt for years.
Many creditors use extortionate interest rates that ramp up your total debt.
In some cases, it feels like you keep making payments but end up owing more money!
One solution is to try and lower your interest rates.
Not many people are aware you can do this.
In effect, there are two methods:
- Contact your creditors and negotiate with them. Tell them you’re struggling to pay the debts, but would be able to make regular payments if the interest rates were lowered or removed. Some creditors will agree to this as it means they get money from you, as opposed to dragging out a loan that might end in bankruptcy and a significant loss of money for them.
- Appy for a debt consolidation loan. Yes, this gives you another loan to pay, but the difference is this loan repays all your existing debts. So, you’re left with just one loan and one monthly payment. Also, the interest rates on debt consolidation loans can be far lower than what you’re already paying.
It’s well worth seeking out ways to lower the interest rates on debts as it can save you thousands of dollars!
Follow these five steps to get out of debt and leave your financial troubles behind.
You won’t be rid of debt overnight, but this advice helps you start on a gradual process of removing it as quickly as possible.
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We can help you start your journey to financial freedom with our debt relief services.
Contact us today, and we will book a consultation that analyzes your financial situation and provides the best course of action to eliminate debt.
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