Whether you have merely been flirting with debt or you have found yourself completely buried in debt from head to toe, there are certain steps everyone can take to get back on solid financial footing.
There are a lot of people who completely ignore the amount of debt they are accruing and, therefore, cannot possibly begin to understand how long it will take to pay off. As soon as you get an accurate number in your head and begin to put a plan together, you will begin to understand your situation.
You need to get yourself into a position where you are earning more than you are spending and stick to it. This could mean, either, earning more or changing your spending habits to cut your costs. There are ways to improve your income such as selling your belongings or working a second job but, believe it or not, it is much easier and more sustainable to limit your spending.
If your debt is continuing to rise, you need to cut your costs. This means cutting back on luxuries, eating in more often or simply use less. Giving yourself a budget is a great way to give yourself an actual figure you can spend and identify areas where you can make savings. Ideas include switching to a cheaper energy supplier, switching cell phone plan, prepare meals in bulk, just to name a few popular ideas.
There are a few ways you can reduce the interest you are paying and put the money you are wasting on interest to better use.
These are a handy little debt tool you can use to buy yourself time to pay off the debt. A balance transfer credit card is a credit card that has an introductory period that offers 0% interest for “x” amount of months. Introductory periods can range from 6 months to 24 months of 0% interest. If you can avoid paying interest for 2 years on your credit card, you can save hundreds of dollars depending on the amount of debt. The only downside is that you need to have a respectable credit score for a successful application and make sure you take into account the fees involved when you transfer your balance.
If you have bought your car on finance, you may want to take another look at your deal. Car dealerships can sometimes charge up 12% -18% on your car payments. Replacing your finance package with a car loan from your bank is a good way to reduce your interest as they are likely to charge you a much lower interest rate.
Credit consolidation gets a bad rep because of the bad deals out there. However, there are deals available that are more than fair and can give you the help you need to get those you owe off your back. A credit consolidation loan is used to pay most or all of your debt in exchange for one regular and fixed payment over a longer period. These loans often offer lower interest rates than credit or personal loans but just make sure you understand and are happy with the terms.
You are not the only one in debt and there are people out there who are willing to help - if you let them. Do some research and find a recommended credit counselor (preferably one who works for a nonprofit organization). They will offer valuable and insightful advice into your debt troubles and how you can most effectively manage your situation.
The lifestyle you lead when dealing with debt is only temporary. It may seem like you are giving up a lot at first but the more you give up the faster you can deal with your debt. That doesn’t mean you can revert back to your old ways. Changing your spending habits to successfully pay off your debt will eventually lead to a permanent behavioral change and hopefully, prevent you from mounting up unnecessary debt in future. It could even result in you having more money to spend in future by cutting out any unnecessary outgoings.