4 Ways to Get Out of Debt
Nowadays it is basically inevitable that individuals, family and businesses make use of credit facilities in order to manage their businesses & lifestyle.
In fact some of the most expensive credit products, are the most easily accessible ones and Australians can choose from a variety. Because of this, it is so easy to get yourself into debt, whether it is credit card debt or personal debt.
Let’s be honest, a credit card certainly has its advantages, like for instance, instead of saving enough money over a period of time to buy something, you can instantly have it by using a credit card.
With personal debt such as a loan, you will have to pay the money back with interest of course, which means that you will have less money in the future
Don’t get me wrong, borrowing money is not necessarily a bad thing, but with a credit card you have to be responsible in order to stay out of debt.
However the truth is that most of us are already struggling with debt and that means you will have to find the fastest and most efficient way to get rid of it.
All you need is proper planning, motivation, a clear set of goals and financial discipline in order to enjoy financial freedom.
When it comes to set goals, you only need two:
- Clearing all of your existing debts
- Remaining free of debt in the future.
You need to have a proper plan in order to achieve these goals. Let’s take a closer look at each one of these strategies.
1. Create a Budget & Manage it
First of all you need to know how much your income is.
Next you will have to plan your spending – meaning what you want to spend money on and how much. Lists are helpful, make use of them.
If you’re spending ends up being higher than your income, you might have a problem.
You will need to cut back on some expenses. When cutting back, it is a good idea to start with the things you don’t really need such as entertainment (movie tickets, eating out etc…), those designer clothes you want, but don’t need and also outings. Basically anything that can be classified as a luxury. Make a list of luxuries versus needs. Your needs include your rent, food and stuff you cannot survive without.
Other things that might be a little harder to cut back on, but that will definitely save your budget, include non-urgent expenses (things you can always buy later on), such as a new washing machine or dishwasher. The important thing is that you prepare a budget for every month, and to stick to it, as hard as it might be.
2. Spend responsibly – Do not overspend
Use cash, not a card.
When you are spending money, the best thing would be to use cash and not a card, because it is so easy to lose track of your spending by just swiping a card. But by using cash, you will know exactly how much you have left, every time you make a payment, which in the end will leave you feeling less tempted to spend more than you must.
To make sure that you stick to your planned budget, you can make things easier by putting the cash for different types of expenses, separately.
3. Reduce your Debt
See which of your credit facilities are costing you the most money.
This is by far the most important thing you should do when you want to reduce your debt. Usually in most of the cases, this would be credit cards and overdraft facilities. They also usually have some of the highest interest rates.
By making use of either one can easily get into debt, mainly due to the fact that it can be rather difficult to control your spendings.
Why would it be difficult to control my spending?
Well because the money is always available, and you can use it whenever you need it or want to.
Another way that you can effectively reduce and in the end get rid of all your debt is through debt consolidation. Whether you have credit card debt, personal loans or overdrafts, this would be your answer.
There are of course two main options you can choose from when it comes to consolidating your debt; unsecured loans & secured loans.
An Unsecured Loan
A loan that is supported only by your credit worthiness, and not by a type of collateral such as property. To be approved for an unsecured loan you generally need to have a high credit score.
A Secured Loan
A loan that is protected by an asset, like your car or home. The advantage of a secured loan is that there will be a lower interest rate.
4. Debt Repayment Negotiators
It is always better to negotiate directly with the lender.
The number one rule to always remember is, never get so far behind with your debt repayments that ultimately your debt is transferred to a debt collection agency.
You can also make use of the professional assistance and help of a debt counsellor. A debt counsellor is someone who will offer you professional advice on some of the best methods available on how to repay your debt. Debt counselling can also help you to avoid bankruptcy.
You might feel embarrassed about seeking help, but trust me, it will help you.
By making use of these 4 very helpful tips, it is possible to completely get out of debt, and you will be able to regain and enjoy the financial freedom you have been seeking.
And let’s be honest with each other – there is nothing more rewarding or satisfying than knowing you are debt-free.
The most important two things to remember are:
- Stick to a good and effective budget that works
- Use your credit card facilities very responsibly
Remember and use this, and you will be just fine in the long term.