Being in debt, especially with the recent history of the global economy, is becoming a fact of life. While it can be a horrible strain on a household’s finances, debt isn’t the end of the world. If you have a lot of outstanding debt, there are a number of things you can be doing to help your situation. Here, I’ll look at some great tips to get out and stay out of debt.
Getting out of any financial ditch is all in the planning. Take some time out to sit down and draft a solid repayment plan. Start off by calculating just how much debt you have, and make a list of the lenders you owe money to. After this, prioritise your debts starting with the one which needs paying off soonest. Figure this out by looking at the amount owed, interest rate, and the terms of the loan. When you’ve got a better idea of all that, calculate how much you can afford to pay off each month. Here’s a handy tool which could make this easier. When you have that amount down, divide it strategically between your different loans. Hold the loan with the highest interest as a priority, and bump down ones which don’t require a payment yet.
In terms of your payment method, setting up automatic deductions is probably a good idea. Make this as large or as small as you like (within reason!) Having money coming out of your account at a set time each month really helps you get used to a routine for payments. It also helps you avoid coming up with excuses to not meet your goals! In general, automatic deductions are reliable enough. Remember to check, though. A bank, like any business, will have errors here and there. If your bank is making the payments late or not at all, you could find yourself in some seriously hot water. Debt-related issues with the IRS can be particularly urgent, so keep the number for a tax problem resolution service.
Once you’ve paid off your debt, make sure you don’t fall into more! A lot of people manage to pay off all their debt in middle age, but then spiral straight back into it when they hit the financial challenges of retirement. When you get out of debt, use the lessons you’ve learned to budget your home finances more sensibly. Keep a checklist of all your monthly bills, as well as any savings quotas you’d like to meet. Strike off the items when you pay them, and treat your savings deposits as non-optional bills you have to pay. Getting into these kinds of routines can take some self-discipline. Keep this up by remembering how horrible debt is!
Your road to a debt-free life could be long or short. Whatever your situation, remember that it can be improved through careful financial decisions. Set yourself goals and stick to them. Keep at it for long enough, and everything will stabilise eventually. Knowing that you’re all paid off and your savings are there when you need it is a truly wonderful feeling!