Debt levels are soaring for more individuals and families than ever before. And it’s no wonder, when pre-saved payment methods, online shopping, and pre-approved credit cards are practically begging us to spend.
An extra date night here, a wedding gift there, a new CD, and a million tiny impulse buys that added up later… and you’re in trouble. And likely shock. Nothing sucks worse than seeing the balance on your credit card and not understanding where on earth it has come from, but realising it was all you.
The truth is, impulse buys add up faster than almost any other. Particularly when they’re added to by monthly interest charges.
So, what do you do? You take control. This article is going to overview methods of getting out of debt and staying that way. It’s going to take time, and it may not always feel easy, but being debt free is infinitely less stressful than the position you’re in now.
Look at your debt. All of it.
A big obstacle to becoming debt free is never forcing yourself to truly face how much debt you’re in. You work and work to pay off one card, only to have ignored the others in the process. Or worse, you’re too anxious to look at the balances, and you let them grow out of control.
This may feel like you’re avoiding stress, but really, you’re only postponing it. So take a deep breath and look at each available credit card and bit of debt that you have to get a clear picture of what you’re dealing with.
This will allow you to make a realistic plan that targets the debt in order of size and interest rate, getting you out of debt as fast as you can be.
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The snowball debt reduction method is, in a nutshell, paying the minimum payment on most debts except the one that you’ve decided needs to go. Pay as much as you can on this one. Keep repeating this process until that first target is down, then target the next debt. Remember, your debts can’t decrease so long as you’re only making minimum payments, so be cautious about carrying this for too long.
Pay as you can, not as you’re required to
Another tip is to make a payment plan with yourself that gets you out of debt faster. This likely means paying a bit off each paycheque, rather than just once a month, but it’s worth it in seeing those numbers shrink over time.
Realise that the only way that you’ll be able to stay out of debt is if you have savings to fall back on next time rather than a credit card. So even as you’re working to repay your debts, save at least something. This builds the habit of saving, and every little bit will add up (just like your impulse buys!), except this time it will add in your favour.
Automate the saving habit
This is in conjunction with the last step, but set your paycheques up to automatically save a portion. This will help you resist the temptation to spend the savings on something else, which is likely what got you here in the first place.
Deal in cash where possible
Paying with cash forces you to think about exactly how much you’re spending, as you’re spending it. By forcing yourself to hand over the dough, rather than just tap a credit card, you will be a lot more mindful about the impulse spending and what you’re doing. It also helps to avoid those nasty credit card surprises at the end of the month.
Think about your wants, your needs, and where you can afford to declutter your life
Too many of us don’t think before we buy. Our houses are packed to the nines with items we can barely afford, and use even less. Take some time and think about your last credit card statement. How much of what you spent was on needs – the essentials? How about wants? What wants are dominating your statement?
By tackling head on the emotions that got you into this mess, you’re going a long way to assuring yourself you are NOT going back. This is one of the ways to simplify your life that will also naturally help you become more aware in ways that benefit you mentally and financially.
Declutter the home
Here’s a final thought to leave you with, how about selling some of that stuff you aren’t using? With online sites like Gumtree and Facebook, sales can often be made to make a profit off gaining space in your home. Consider that or a garage sale to declutter, and then take the money and save some and spend the rest on debt repayments. This is a great way to be productive again financially and mentally, and will likely help you to feel good too!
Nobody likes feeling in debt, so the best way to deal with it is to face it and work to get out of it. As you’re working though, it is important to think about how you got into debt in the first place, or you’ll be right back here again in six months. By combining good habits with financial awareness, you’re ditching the debt and maintaining your chances at debt freedom. Take heart, you can do this!