Making a committed decision to get out of debt is tough. Coming up with the money to pay your debt off is even harder, especially if you’ve been living beyond your means. If you want to get out of debt, you have to earn enough money to survive and enough money to pay your debt. Focus on improving your personal finances, buying only what you can afford and cutting out unnecessary expenses is key to getting started. It’s time to take control of your money and zero down your debt.
Step 1: List all of your debt, their balances and interest rates
Start by figuring out exactly how much you owe by listing your debt, the balances, monthly repayments and how much interest you are paying. By doing this, you will be able to tailor a plan to suit your personal financial situation.
Step 2: Take responsibility
Confronting the issue and taking responsibility is key when you start tackling your debt. Rethink your lifestyle choices, what you spend your money on how you can cut down on unnecessary expenses. Part of taking responsibility is owning up to your bad habits and committing to creating new healthy habits!
Step 3: Work out how much you can pay towards your debt
First, assess how much money you can contribute towards debt every month. Do a rough estimate of how long it will take you to pay down your debt. Next, call all your creditors, explain the situation to them and make a payment arrangement that will suit you both. People are more understanding when you confront the issue head on rather than avoiding them.
Step 4: Every time you pay off a debt, you have more money to throw at the next one
This is also known as "debt snowballing". Each month, pay your smallest obligations first. Once smaller debts, such as quick loans, are paid off, use the money you’ve freed up to increase your minimum payment towards the next debt you want to pay off. Slowly but surely, you will start settling debt and paying bigger amounts (minimum required payment + money freed up) towards your outstanding debt. This method will also motivate you, as you start paying off your debt. Tip: Don’t spend the money you’ve freed up - keep the momentum going. Get tips on how to stay motivated.
Debt doesn’t have to be forever. Develop your financial game plan and start your journey toward being debt-free today.
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