Landing in debt is incredibly stressful. Likely, it didn’t happen all at once, but rather little bits here and there that accumulated over time. No matter the reason or how long it took, once you decide the stress is too much, it’s time to come up with a plan to get out of debt. Getting out of debt doesn’t have to be confusing, but it will take willpower, consistency, and effort on your part.
Here are seven tips that can help you get out of debt and take control of your finances.
Create a Monthly Budget
There is no way to start getting out of debt if you don’t have a monthly budget. You need to know exactly how much your bills total monthly and what your monthly income is. Your income needs to exceed your bill payments; otherwise, you’ll be sinking deeper and deeper into debt.
Building a budget is quick and easy nowadays, thanks to the many useful personal finance apps and tools that exist. You’ll be able to scroll through all kinds of options, allowing you to pick the one that you like best. Make sure that whatever app you pick allows for customization, is user-friendly, makes it possible to track expenses in real-time, and lets you set up bill payment reminders.
Stop Using Credit Cards
This next tip probably comes as no surprise, but it still needs to be said. If you want to get out of debt, you’ve got to stop using credit cards. You’ve probably heard it before: if you only pay the minimum payment on your monthly balance, you’ll never get out of debt. So, unless you plan on immediately paying off purchases in full, using a credit card is asking for trouble.
Let’s also mention that the interest rate paid on credit cards is astronomical. An item that you purchase for $100 is much more if you take months to pay it off at 20% interest!
Focus on Paying off the Highest-Interest Debt First
Speaking of high-interest debt, any financial expert will tell you to prioritize your debt and pay off the highest interest one(s) first. These are the ones that are costing you the most money over time, so getting rid of them first is the fastest way to financial wellness. As mentioned earlier, these tend to be credit cards.
Increase Payments if Financially Possible
Did you know that any time you can make an extra payment, you speed up paying off loans significantly? People who make one or two extra mortgage payments a year can shave a couple of years off the entire amortization of the mortgage. Instead of paying off your house in 25 years, you may be able to get it down to 20 years, as an example.
It depends on the amortization, interest rate, and how much you pay. Also, make sure to check if you’re allowed to make extra payments, as some lenders may have annual limits. Exceeding those limits may result in penalty fees.
Can You Earn Money With a Side Gig?
Even if you follow all the tips mentioned up until this point, it still may not be enough. You may need to find ways to earn extra money. Not everyone can take extra hours at work, ask for a raise, or look for a new career. This is why a side gig can be a great solution. If there’s a skill you can offer clients, then you can use all those earnings for debt repayment.
Some of the best side gigs include:
- Blogging
- Dog walking
- Babysitting
- Housesitting
- Consultant services
- Digital marketing services
- Catering
Most of these requires specific skill sets, so they may not necessarily apply to you. But the idea is to brainstorm, consider your education and training, and look for ways to make some extra money with your knowledge and experience.
Discover Entertainment You Can Enjoy at Home
It’s impossible to cut out all forms of entertainment because you still want to enjoy yourself. That’s why a more reasonable approach is to focus on finding good deals like how to claim a $10 bonus that could take your money a little further. Other ideas are movie nights at home, board game nights with friends, or even a potluck dinner where everyone is responsible for bringing one dish.
There are so many things that you can do around the house or in your town that cost next to nothing. Try looking into your local museums and galleries for free or cheap admission, and don’t forget to check out the line-up of events such as fairs and markets that can also be free to attend.
Start Cooking All Your Meals and Cut Out Restaurants
Did you know that one of the most expensive things in peoples’ budgets is food? We all need to eat, so it’s not like you can cut out food. You can, however, cut out restaurants and fast food. This includes your morning coffee at your favourite coffee shop.
By making the promise to yourself to cook all your meals at home, including lunches that you can pack to take to work, you’ll probably be shocked at how much money you’ll save. You can also make meals that provide enough food for several days, so you don’t have to cook each day of the week. Some people prefer to spend a day on the weekend preparing and cooking meals and then storing items in the freezer. You can then take out individual portions throughout the week.
If you need some help with recipe inspiration, there are many resources online that focus on meal prepping and inexpensive meals.
There Is a Way Out of Your Debt
As you can see from these tips, there are plenty of ways you can get out of debt. It will take time and effort on your part, but just imagine how freeing it will be once you’ve paid everything off. These tips are also smart financial habits to adopt and will help prevent you from getting into debt again later in life.