Getting into debt can be a turbulent experience, resulting in other hardships that follow, such as family issues, declined mental health, and financial distress.
If you’re wondering how to get yourself out of debt, this is the right article for you, as we will present six solutions to begin your journey.
1. Keep Track of Everything
It’s hard to keep track of all of your purchases, including the Netflix subscription, dining out, and impulse buys at your favorite stores. However, it’s a crucial step to getting out of debt.
Get a better handle of your data with these tips:
- Gather all of your bank account, credit, and debit card statements from the last 12 months
- Find any receipts lying around, especially in the car, purse, or wallet
- Obtain all of your bills in the last 12 months, including loans, utility, phone bill
After you’ve gathered all of your data, begin assessing the following:
- Where do I spend the most money?
- Have my bills changed in the last 12 months?
- Which purchases or subscriptions do I need?
- How can I cut my costs?
Tracking fluctuations is also an excellent way to see where your money is going.
Some apps, such as Mint, categorize your expenses, which is a great way to see where exactly your money is going.
Once you have a handle on your data, begin becoming frugal until you can make debt payments comfortably.
2. List Your Income and Debts
It’s better to visually see where your debt and income are to tackle the issue more efficiently. If you are artistic, you can create a chart or list to hang up in your house, or you can just use a notebook to keep track.
Either way, write down the following:
- The bank or whomever you owe money to
- The amount
- Minimum monthly payment
- Interest rate
- How much you make each month
Pick a time frame of how long you want to continue paying your debts, such as 1, 2, or 3 years.
Subtract all of your monthly obligations, such as bills and groceries from your monthly salary. Set aside the remaining balance towards your debts.
3. Lower Interest Rates
The higher the interest rate on your debt, the longer it will take you to pay them. Plus, a higher interest rate means a higher bill at the end.
To break the cycle, lower your interest rates by doing the following:
- Consolidate student loans
- Refine your loans, including personal, car, or home
- Pay off the credit card with the highest interest rate
- Get a balance transfer credit card to lower the interest rate, possibly to 0% for 12 months
A popular way to reduce interest rates is to obtain a credit card with low-interest rates. Credit cards where you’re pre-qualified increase the chances of getting that card, as you must have a high credit score to get a credit card with low-interest rates.
4. Increase Your Income
If you’re swimming in debt, one option is to begin earning more money.
Those with a full-time job may find this step difficult, but luckily there are “side hustle” jobs such as Uber, DoorDash, or other options to make money in your free time. Other ideas include weekend dog walking or freelancing may help pay off debts in the long-run.
Another solution may be to ask for an increase or promotion at your job. Learning a new skill could also help increase your odds of getting a raise.
Finally, selling products online is also a popular choice. Consider selling things around the house that you don’t need, such as electronics, for extra cash.
5. Tackle Your Expenses
As you are in debt, it is essential to become frugal.
It is a lifestyle choice to control how you spend your money. Assess where your money goes every month to get a solid idea of your expenses.
Then, put things in perspective. Canceling subscriptions you barely use, avoiding fine dining, and skipping activities like going to the movies can save you hundreds of dollars that you can put towards your debt.
6. Begin Budgeting
If you haven’t started yet, budgeting is essential to get a clear picture of your expenses.
Write down all of your assets and liabilities and begin a debt management plan at the same time.
List the following on a sheet every month:
- All of your income from salary and side-jobs
- All of your expenses
- All of your debt
Start a debt management plan by ranking them from most owed to least owed. Begin choosing a time frame best doable with your income, and start chipping away at your debt.
Rinse and repeat!
Budget for Success
Contemplating how to get yourself out of debt now becomes more manageable with these six essential steps.
The hardest part is applying them to your daily life, but it isn’t impossible! With persistence, you should be able to get yourself out of debt, as millions have done it, and you can do it too!