Being in debt, especially if it’s big, is very stressful. Whatever your situation, you’re stuck paying it off, even if you’ve lost your job and have no income. Sometimes debts can be a consequence of simply spending too much on holidays or treats, and sometimes you take a loan when you really need it. In any case, paying off a debt can be very difficult and can interfere with your desires and plans. Sometimes being stuck paying off a huge debt can lead people to depression. But that doesn’t have to happen to you. Here are some tips that could make your situation easier and help you pay off debts more quickly and painlessly.
1. Decide to stop borrowing money
The first and the most important thing you should do if you want to get rid of debts is to make a conscious decision to stop borrowing money and use only the money you have at your disposal. Adjust your lifestyle to your financial situation. This means no more spending lots of money on things you don’t really need, no taking loans for buying new clothes or furniture, and especially holidays and splurges. Once you do that, you’ll only have to pay off the debt you already have, and you can do that one day at a time.
2. Stick to a realistic budget
In order to get out of debt as quickly as possible, it is very important to see how much you’re earning and how much you’re spending, as well as what you can change to start earning more or spending less. This will help you move in the direction of your goal – getting rid of debt and reaching a more stable financial situation. You should track your income and expenses in order to get insight if you have (or can have) some money left over or if you’re in the negative. The goal is to manage to save some money and use it to pay some of your debt. One of the ways to get some extra money is to earn it. There are many freelance jobs you can apply for and do one of them as an additional job. Another way is to cut down your expenses – start buying only the things you need and cut down on luxuries, make purchases in stores where the items you buy are cheaper, etc.
3. Make a plan for paying off your debt
Making a plan for how and when you’ll pay off your debt and sticking to it is very important. One way to do it is to list all your debts from the smallest to the largest, and start paying from the smallest. If you stick to the plan, you’ll continue paying off debts and depending on how much money you can put on the side for that purpose, you should be able to pay off everything in a short period of time. Another way, maybe a better one, is to start with the debt with the highest interest rate first, as in that case you’ll save more money in the long run. Choose one method and stick to it, and paying off debts will become much easier than it was before.
4. Use any extra cash you get to pay off a portion of your debt
If you’ve unexpectedly gotten some money, the best idea is to use it to pay off some of your debt. For example, if you received an inheritance or you sold a car, it would be best if you used the money to speed up the get-out-of-debt process, instead of using it to buy something you want or go on a trip.
5. Set up a repayment schedule
Whenever you miss a payment, your debt increases. Therefore, it is important to always make at least a minimum payment for every debt you have. Debts with the highest interest rate can really add up if you miss payments, so this one is your priority. If you regularly pay off the installments, your minimum payment will decrease, and you’ll be able to pay off your entire debt more quickly. Make a schedule. For instance, if you receive your paycheck every first of the month, you should make a repayment in the following few days (in order to ensure that you won’t spend that money elsewhere). Once you’ve made your payments, you’re left with just the amount of money you can actually use, so you can make realistic plans about your spending.
Getting out of debt isn’t easy, but if you get well-organized and stick to your plan, you’ll manage to do it. The sooner you get rid of it, the sooner you’ll be able to start living a less stressful life.