5 Tips on How to Get Out of Debt

Being in debt can be miserable. No one wants to receive their hard-earned money, then have it all go to settling monthly bills, saving for the unexpected rainy days, and paying back debt. Getting out of debt can be a hassle, especially if you are still paying your creditors the minimum payments. However, this doesn’t mean it’s impossible to get yourself back to a position where you can make the most of the money you’ve earned for yourself. The following 5 tips can get you out of the trap of debt.

 

1. 1. Avoid Borrowing More Money

This is the first and crucial step to getting out of debt. Try to rely less on credit in your daily life; no more loans, new debt, or swiping credit cards. This way, you can focus fully on getting out of your current debt. Make a resolution to live using cash whenever possible, and spend within your means so that you don’t end up constantly reaching for your credit card. Most importantly, you must change your attitude on money to make such essential changes. Why not look forward to a new phase of life without any new debt?

 

2. 2. Increase Your Payments

When you pay more than the minimum payment, you get out of debt faster. One rule of thumb you can try is to double your typical payments whenever possible. This is especially important for debt with high interest. Increasing your debt payment reduces your principal balance on the credit card and increases the overall rate at which your debt reduces. In the end, you end up paying less interest. With a proper budget to follow, you can find out how much extra money you can afford to set aside for your debt.

 

3. 3. Make a Budget

A budget is an important resource when you want to get out of debt, or even when you just want a general idea of where you stand financially. You can construct your budget using tools you’re already familiar with, like a spreadsheet on your laptop, or you can take advantage of online budgeting apps. Remember, with a budget, you can account for every dollar you make, where you spend your money, and how much you save. Keeping this record will make it so much easier to take the proper steps to tackle your debt.

 

4. 4. Cut Back On Your Expenses

At times, when you are geared towards getting out of debt, all you need to do is readjust your budget. This is more practical, especially when you cannot earn more money to pay off the debt by having a side hustle or work part time or for extra hours for more pay. You can reduce the amount of unnecessary expenses you may be having. To do this, you have to go through your regular expenses and figure out what is most important, such as food, utilities and housing. Once you have determined which of your expenses are necessary, you can figure out the ones you can realistically reduce for a while until you get out of debt. Could you spend less on entertainment? Is it possible to buy less or stop buying new clothing for some time? Once you know your needs and wants, you can cut back on the unnecessary expenses and retain some extra money, which you can in turn redirect to clearing your debt.

 

5. 5. Negotiate With Your Creditors

Did you know you can renegotiate your credit card contracts? You may ask to pay a lump sum amount rather than making monthly payments that can be costly, or you can ask your creditors for a debt settlement. Additionally, you can call them to request for lower interest rates on your credit cards. A good payment history is crucial at this point to ensure that your requests are honored. Alternatively, you can negotiate the fees on your credit card, or ask for a waiver on the fees and any other charges. You have much to gain by getting a positive answer—so, why not make that phone call? You may be surprised at your creditors’ response.

 

 

Conclusion 

Getting out of debt can be difficult. However, it is possible, and you can do so with the 5 tips mentioned above. Once you’ve freed yourself from a cycle of debt, you can direct your income to the important things in life that you’d much rather spend your hard-earned money on.