There isn’t anything worse than being in debt and not having the means to pay it back in a timely manner. When these situations occur, it can seem as if you are trapped and there isn’t anything you can do to get out of debt.
However, there is hope regardless of what your monthly income may be. By taking the proper steps to pay off debt at a pace that works well for you, you can eliminate the pressure that comes along with not being able to handle the debt payments.
Here are five simple rules that will help you pay off your debt and avoid gaining any further debt in the future.
1. Budget Correctly
The first step to starting a path towards reducing the amount of debt that you owe without it hurting your credit is to budget correctly.
In order to budget correctly, you need to determine various details about your financial situation, including your monthly income, any expenses you may have and the total amount of your debt. By establishing these numbers, you can determine what expenses are necessary and work to cut out the unnecessary expenses in an effort to lower the amount of money you have to pay each month.
After conducting a complete financial analysis of your current situation, then you should be able to formulate a budget that meets your needs. Be sure to remain as detailed as possible when putting together the monthly budget plan, including even the smaller costs that you may regard as less important. After forming the plan to pay all monthly expenses, you can then use the remaining money to pay off any debt that may exist.
Lastly, be sure to try and work with credit card companies, student loan services, etc. to make a monthly payment that works according to your income and budget.
2. Stay Financially Disciplined
After correctly setting a budget that is realistic, it’s crucial to follow through on the budget and stay consistent and financially disciplined as you begin to pay off the debt. Otherwise, the amazing budget that looks fantastic on paper is useless.
There are several ways to ensure you stay financially disciplined when paying off debt is to find motivation, which can take several different forms. Every individual’s financial motivations are different, but a few examples of good motivational reasons to pay off debt could include having the freedom to save money for your child’s college fund or taking the overseas vacation trip you’ve always wanted to take.
Another great way to make staying financially disciplined while paying off debt is to create an account specifically for paying off debt and then setting up an automatic transfer – which allows a certain amount of each paycheck to go directly into the savings fund – to ensure you don’t mishandle the money.
Remember, paying off debt takes consistency and dedication in order to stay on track without missing payments.
3. Look for Other Financial Opportunities
In many instances, the monthly income simply doesn’t add up to cover the monthly expenses – especially when there are debt payments that need to be made. In the event this is the case, you should first take a deep breath and realize you’re not the only one, and then start thinking in an optimistic manner by seeking other financial opportunities outside of your line of work.
One of the best ways to quickly increase your monthly income is to use any talents you may have to find extra work. For instance, if you are really good at being a salesman, you can find an opportunity working off of commission as a part-time salesman. If you’re young and strong, then you may be able to work for a moving company on weekends as means of making extra money.
If you don’t have time for a part-time position, then perhaps there is a valuable item that doesn’t have sentimental value to you that you can sell. Although these are just examples, there are numerous ways to earn extra income and I’m sure you can find an opportunity that is right for you if you search in an optimistic manner.
4. Find Ways to Lower Your Debt
Along with trying to increase income, it can also be helpful to try and lower the debt as well. Many student loan services and banks are willing to work with you as you pay off your loans.
One of the easiest ways to quickly lower your debt is by refinancing your car payment, which many dealerships are willing to do. In many instances, doing so can cut your monthly car payment by hundreds of dollars.
If student loans are the main source of your debt – which is the main cause of student debt in Americans – then you can oftentimes negotiate your monthly payment to a reasonable number that works for you. If you don’t currently have an income or are still taking classes, then you can, in many cases, cease payments until you receive a steady stream of income.
Whatever the case may be, the important thing is that you try everything possible in an effort to get your debt under control and lower the payments, and you may just be surprised at the results.
5. Create a Savings Fund
Lastly, saving up money is another excellent way to ensure you meet all of your debt payments. Also, creating a savings fund has an even bigger impact on your ability to avoid future debt, which crucial to maintaining the financial freedom as time progresses.
As mentioned earlier, the best way to save money is to create an automatic transfer to your savings account – which means a portion of your paychecks is transferred directly into your savings instead of checking.
By saving money, as well as creating a budget, seeking other financial opportunities and lowering your debt, you should be on the right path towards eliminating your debt altogether and living a financially free life.
If you have any experience getting out of debt, share a comment with your best tips and advice in the section below.