Getting Out Of Debt Cheat Sheet
The world today is brimming with debt. Governments can barely afford to pay back their lenders. States are going bankrupt. And individuals are losing their homes. This is not good.
Being in debt isn’t entirely the fault of individuals. Debt has become a tool that governments have overused during the last few decades. We’ve all been incentivised to rack up large debts with low-interest rates. But now all that cheap debt is coming back to bite us. So what can we do as individuals to solve our own personal debt crisis?
Make A Plan
Having a clear and precise plan of action can really help to alleviate yo debt problems. Knowing exactly how much you own, and to whom, makes it easier for you to prioritize.
If you have multiple outstanding payments, focus on those with the highest rates of interest attached. You want to pay these off first before you move on to other debts. If you are really struggling with a high-interest payment, you may be able to negotiate a lower rate with creditors.
The next step is to cut costs. This means going through all your past bank statements and calculating your income and your outgoings.
First, split your outgoings into two categories: essential and nonessential. Essential outgoings include things like rent, utility bills and food. Scrutinize your list of essential expenses. Is there anything you can do to reduce them?
Can you, for instance, switch energy provider and go on to a lower tariff? Can you reduce your phone bill by dropping down the number of minutes in your contract? Can you save money on food by buying less meat and eating more beans?
Once you’ve looked at the total you can save write it down. Next, look at all your non-essential outgoings. This includes things like trips, entertainment, and meals out. Mostly these can be cut out completely, but be realistic. Prioritise one thing each week as a treat, and cut out the rest.
Once you’ve worked out how much you can save each month, you’ll have a good idea about how much you can allocate to getting out of debt.
No matter what type of debt you have, you may be able to simplify it further, by consolidating all your payments. For example, if you have student loan debt, you can apply for student loan consolidation.
Consolidation means that you only have to deal with a single lender, a single payment and a single interest rate. It means that planning your debt repayments is a lot easier. If you’re somebody that struggles to keep a tab on who you owe, this can be a real bonus.
Finally, you want to ensure that you don’t become overly indebted in the future. This will require a change in habits. At the root of most debt problems is a bad habit of some kind. Perhaps it’s drugs, gambling, or just shopping to feel better. Before going into debt again, deal with the underlying issue and protect yourself.