5 Ways To Get Out Of Debt
It can be far too easy to find yourself in debt. Unfortunately, the same can’t be said for getting yourself out of it. It really doesn’t matter what your debt comes from, there is nothing “good” about debt and you have to pay it back either way.
Unfortunately, for many, they can find themselves paying off debt for the majority of their lives. Living with debt can place a lot of unnecessary stress on yourself not only due to the mental but also because of the financial burden.
Recent statistics reveal that there are 14,482,877 credit cards in Australia as of March 2020.
Some believe that you don’t have to simply accept living with debt and it doesn’t have to take you an entire lifetime to pay off.
Having a good action plan when it comes to getting out of debt and following it to a tee can help give you the right track to follow to successfully navigate yourself out of it. There are certain strategies that you will be able to leverage to speed things up. Below are 5 steps to getting yourself out of debt.
1. Know The Numbers
As your debt continues to pile up, a lot of people look to avoid it entirely. After all, “out of sight, out of mind.” Thus, rather than confronting their debt head-on, they allow it to continue to spiral out of control. If you are looking to get yourself out of debt, the first thing you must do is make a list of everything you owe. Write down the following:
- Who you owe
- How much interest you owe
- The total interest rate
- The total payment amounts
Having a comprehensive list of everything you owe might make things real and scary, it can really help. By having everything written down, you will have all of the information you need to develop a strategy to pay everything off in its entirety.
2. Track Your Finances
There are two main factors at play when it comes to paying off your debt.
- First, you want to try to leverage the discretionary income you do have into paying off your debts before buying anything else.
- Second, you want to avoid taking on additional debt if at all possible. While it is certainly easier said than done, anything you can put towards paying off your debt can do wonders.
Finance Analysts at Max Funding say,” by having a crystal clear understanding and overview of your finances, you will be able to figure out where you can start to cut down on your debt without negatively impacting other areas of your life. If you don’t currently budget, you can utilise budgeting software which can help you track everything accurately and make the entire process less time consuming and less of a burden.”
3. Come Up With A Plan
As soon as you have written out all of your debts and once you have come up with a budget, you will be able to sort through which loans should be paid back first.Whether you want to pay off the home loan or auto loan first, there are two distinct strategies that you can consider:
This is the strategy of paying off all of the debt that you have that accrues the most interest. This is the strategy that is going to end up saving you the most money over the course of time.
This pay off strategy is when you focus on paying off your lowest balance first and continue to work your way up the ladder to your highest. This approach is much more likely to be mentally/psychologically rewarding as you will be able to completely cross off loans and debts earlier than you would with the avalanche method.
No matter which you end up choosing, as soon as you pay off a loan, you will want to utilise the money you would have spent on that loan for another debt on your list. You may even decide to mix the two strategies together and tackle some of the smaller debts first prior to paying off your debt that is accruing the highest interest rates.
4. Always Celebrate Your Wins
The entire process of getting out of debt can be long, tedious, and not fun at all. Because of this, keeping yourself motivated towards the end-goal isn’t the easiest task. As a result, you want to look to create smaller and attainable goals that you will be able to celebrate. By creating these smaller and attainable short term goals, you should be able to continue to give yourself the motivation you need to reach your ultimate end goal of being debt-free.
5. Get Out Of Debt
There are all kinds of things that you should be doing when you are looking to get out of debt quickly. Making significant lifestyle changes is one of the best things you can do to make big gains. You should consider implementing some of the following strategies:
Cut Back On Spending
To increase the amount of money you are able to put towards paying off your debt, you will need to spend less or make more money. You can do this by switching up your lifestyle and really finding small cuts you can make here and there.
Always Look For Deals
While you could cut back on your spending by simply spending less, you could also attempt to spend more wisely. Check to see what you are spending the most money on in terms of your necessities and try to score savings on those items that you are already buying. You can use coupons, shop during sales, or even buy in bulk to score deals.
Get Another Income
You can always try to add to your income. Either by finding another job, getting a second job, or even by doing a side hustle. By making more money, you will have a much easier time finding the extra money you can use to pay off your debt.
Refinance Your Debts
If you have good credit now than you did before the loans, you will mostly be able to refinance to save big.
If you qualify, you can find credit cards with a promotional rate of 0% for balance transfers. These cards can earn you extra time to pay off your debt without having to worry about high-interest rates.
By using the right strategies, you should be able to get out of debt quickly and get started on a better financial track. Use some of the tips above and you should be able to get started on your journey to finally being debt-free.
Written By: Claire Dawson