Having debt is the worst financial issue a man can ever face in his life. If you have too much debt on your shoulder and can’t make regular monthly payments, it is possible that you might face financial issues. It is because you might be contributing a major part of your income towards monthly payments on debts and that’s why you can’t manage your monthly budget. Apart from that, growing interest rates can also become a burden and increase your debts. So what are your options? Is it possible to ditch your debts? With a solid plan and a lot of hard work, you can get out of debt and get back to a secure financial path.
If you have any confusion about how to start, let me help you with 6 amazing tips to ditch your debt and become debt free.
1. Stop building more debt
Avoid most of the unsecured debts. You may accept some unavoidable ones like the student loan as it is necessary for your education. Avoid applying for new credit cards, any payday loans, personal loans, etc. Hide your credit cards and consider freezing your credit for the time being.
Staying on track with your credit card payments is necessary for you. If you miss a payment, your next payment due will be much higher. Additionally, you’ll be charged a late fee. That will put a load on your monthly budget, and make you use your credit cards again.
2. Analyze your situation
Analyze your financial situation by comparing your income vs expenses. Prepare a list of your debts, your creditors, the amount you owe, the minimum monthly payments, and the interest rates. In the end, determine the total debt amount that you need to pay off.
3. Decide your strategy
There are two popular ways to get out of debt, they are:
- Snowball method – You need to list your debts from smallest to largest, considering debt amounts. Pay off the smallest debt first and after that shift your focus on the next smallest debt. Don’t forget to make other minimum debt payments, ever.
- Avalanche method – You may prepare a list of debts from the smallest rate of interest to the highest rate of interest. Pay off your debts by focusing on the highest interest rate first. Practically, you’ll save a big amount in the long run from interest payments.
These debt repayment strategies are quite helpful to get debt relief no matter what amount of debt you are carrying now.
4. Make a tight budget
You may need to cut expenses from eating out, shopping, travel, entertainment, etc. You need to find hacks to spend less. Use gift cards instead of giving money or other gifts in case you get any invitation. Start shopping from thrift stores. If you have a big place to live, get a roommate. If you can manage your transport, sell your car. Having an emergency fund can make you more confident to handle debts and become debt free. It is because you’ll have enough money in your hands to handle any kind of monetary crisis other than your debts.
These strategies are quite challenging. You can’t do this if you don’t have a strong mind to follow this path and become debt free.
5. Consider side hustles to earn extra money
You can work part-time or provide full-time freelance services. You can teach painting, music, languages, and even arts and crafts. If you are a health freak, you can work as a part-time gym trainer too.
If you have an interesting hobby which can earn you good money, go for it. Try any means possible to get extra money and put that amount to pay off your debts. This way you can ditch your debts sooner than usual.
6. Always track your progress
Ditching your debt is difficult and you can’t be the winner in one day. It takes a lot of hard work, commitment, and mental strength to achieve this success. So, it’s important to track how fast you are approaching your goal. You’ll be motivated if your pace is good and your debts are getting paid off properly. Make sure to reward yourself in a budget-friendly way as soon as each debt balance hits the bottom.
Paying off debt is crucial for building a good financial profile. You may find difficulties to save for retirement if you have huge debts on your shoulder. That’s why you must follow a plan to get out of debt as fast as you can.