Once you fall into the debt cycle, it’s very difficult to get out of it. Most people try to prioritize and choose to borrow money to cover the existing debts, which practically leaves them digging a deeper hole for themselves. In the challenging economic climate and the consumer society we live in, people can rarely afford to invest or save money and the majority lives from paycheck to paycheck. Being in debt can be a lot to handle, no matter what brought you into that situation. Take a deep breath – there is a way out. Here’s where to start.
Understand the Reasons Behind the Debt
The only way to get out of debt is to have strong determination and analyze what went wrong. Today, the economic power of an individual is not big enough to obtain the middle class’ basic needs, which is why we are continuously pushed to getting loans. Credit cards can be tricky and they are certainly one of the most common reasons why people experience severe financial difficulties. If you don’t pay attention to your spending, the debt keeps piling up and before you know it – you owe too much money. In addition to underestimating your repayment capabilities, poor money management and unexpected circumstances are the two main slippery slopes. So, first things first: map out what got you where you are now so you don’t make the same mistakes again.
Use a spreadsheet and list all your debts, balances, interest rates, and minimum payments to get to the final figure you owe. Arrange your debts in accordance with the height of the interest rate. This is the only way you’ll be able to see exactly what you’re dealing with. Make a new spreadsheet to track down all of your expenses. This means you’ll have to adapt to living on the budget, which will not be a pleasant experience if you’re used to dining out or going to the spa often. It’s time to be brutally honest and tough to yourself. There are so many hidden expenses you don’t pay attention to on a daily basis. Commit to making smarter choices: for instance, if you always buy yourself lunch during the break at work, start packing food to save up. If you’re a smoker, this might be a great time to learn how to channel stress and try to kick the habit.
Stay Calm and Choose the Best Exit Strategy
There are three main options you can consider for pulling yourself out of debt, but not all are suitable for every particular debt situation. The first option would be to discuss the problem with your lenders or creditors. Credit card companies usually have internal hardship programs and the counselor on duty can help you by offering you certain solutions to repay your loan or lower your payments. This is a good solution for those who have instantly realized they’ve bit more than they could chew and now they are falling behind with payments. Debt relief options are the optimal option for those who are way over their heads and unable to pay minimum monthly payments. These include getting a debt consolidation loan or debt settlement, and allowing a professional come up with a structured plan with a defined time period, so you don’t go bankrupt. The third option is to start paying off your credit cards starting from the smaller debts you can cover. This triggers a positive mental shift and gives you the motivation to stay persistent, similar to the satisfaction we have by scratching one thing out of our to-do lists. This is a wise choice if you don’t mind the length of the time needed to pay off all the debts. Plus – it will better your credit score.
Experiencing debt is exhaustive and stressful, but there is a solution to everything. Consider these tips and take in mind new ways to earn some money on the side, so you can put your debts behind you in a shorter time period.