Debt can feel like an enormous hole in the ground with nothing to grab hold of and no way to get yourself out. Don’t despair if you have found yourself in a credit crisis. Many others have been in your situation before and worked their way out. You can too, with some hard work, focus and helpful hints along the way.
- Make a Payment Plan
Now that you have decided to make a change, you need a plan. There are three common strategies to paying down debt that have two things in common: make regular payments and avoid additional overspending through smart budgeting. The first strategy is to consolidate it into one loan with reasonable interest payments. If you have high-interest debts, fast cash loans can help you to roll them into one manageable amount with a reasonable interest rate.
The second approach is called the snowball method and involves paying off the smallest amount first while making minimum repayments on the rest. You then focus on the next smallest debt, with the idea being that you gather momentum (like a snowball) as you go. The third method is called a debt avalanche. It involves focusing on the highest interest loan first. Think about what will motivate you more. If you have high-interest debt and feel overwhelmed, debt consolidation is worthwhile. A debt snowball can keep you motivated because you see quick and definite progress. However, the debt avalanche method is more mathematically advantageous than the snowball method.
- Cut Down Your ‘Wants’ Budget
Just like a five-year-old with their favorite toy, we often think we need a whole lot: Netflix subscriptions, gym memberships, a new outfit for that date on the weekend, coffee and bagels from our local café. While these things might feel essential in our day-to-day lives, you will find that we can survive without them! While you are paying off your debt, commit to reducing your spending in these areas dramatically. You can explore free alternatives like walking or riding your bike to work, streaming free live online and making your breakfast at home. You might be surprised by how much extra cash you have in your bank account.
- Shop Smarter
Reducing spending doesn’t always mean going without – sometimes you can cut costs by buying differently. Buying in bulk is a great way to access discount pricing, as is choosing the home brand versions. Another smart way to lower your grocery bill is to cut the household consumables from your shopping list by investing in reusable alternatives like beeswax wrap instead of cling film and microfiber cloths instead of paper towel. The initial investment might be slightly higher, but the long-term savings are clear.
- Find Long Term Balance
When we are paying off debt, it is worthwhile pinching pennies wherever you can to get rid of it as quickly as possible. Once you are debt free, you need a plan to ensure you stay that way. Which budget-cutting measures made your life a misery? And which didn’t you notice much at all? You may even have found a new routine that you love. Make sure you take a long hard look at your finances to work out how to keep your bank account healthy into the future.
The trick to getting out of debt and staying out of it is to have a clear strategy in place and take it one step at a time.
