Learn how to manage your money and have peace of mind with some simple steps
In a day, they are small and make almost no difference to your budget. Within months, these have grown, multiplied and are sucking all of your monthly income. But don’t worry: we’ll teach you how to get out of debt.
Indeed, the story of a debt can start in many ways. For some people, this started with a decision to live at a higher standard of living than their income allows.
This posture is usually adopted to impress other people. So, to maintain these new costs, some people started using the entire credit card limit.
In addition, they pay only a small part of the card balance to have more money available for other new unnecessary expenses.
When the card and salary no longer buy expenses, the loan festival begins. In this, a new loan is requested to pay off the previous loan.
Then debts pile up, your credit dwindles until no one else will lend you money (except by charging extremely high fees). It is only at that moment that we realize that we are up to our necks in debt.
For other people, it can happen in another way. Some people just leave it to pay the bills later out of carelessness. As they don’t keep a budget, they simply forget these accounts exist.
Thus, they start taking on new debts until they realize they have spent too much. Others, however, did not choose to be in this situation.
Health expenses, house repairs, car repairs, or any other kind of unavoidable and indispensable expense arose when these were not prepared.
Well, the good news is, regardless of how you got here, there is a way out. Just follow the “path of the golden bricks” of those who learned to get out of debt.
How does debt impact your financial and personal life?
Indeed, the market looks with suspicion on those who have debts. Typically, people who accumulate a lot of unpaid bills have a bad credit score.
By the way, if you don’t know what a credit score is, its importance and how to increase it, you urgently need this knowledge!
For now, know that lenders, among other criteria, look at this indicator before deciding whether or not you should be accepted for a loan. If your score is low, your chance of being rejected is high.
Also, if you are accepted, you will have to deal with very unfavorable conditions (above average interest rates). This is because the market sees you as “unreliable”.
So, they need to ensure that they have higher profits to “take the risk” of offering you a loan. Thus, mortgages, student loans, car loans, and personal loans will become much more difficult for you.
Bad credit will also restrict your access to credit cards and banking. As a rule, you will only have access to not-so-good services.
Also, some specific employers traditionally prefer not to employ a person with a lot of debt. In fact, this is especially true in financial services companies, law enforcement departments, and in the military.
Managers in these industries believe that people with debt may be more likely to accept bribes and act illegally.
So, for prevention, they find it more prudent not to hire a “debtor”. Do you realize that there is a “vicious cycle” here? The more indebted you are, the fewer options you have to reverse the situation.
Hence, you need to know how to get out of debt and avoid it once and for all.
5 tips for paying down debt as quickly as possible
Now it’s time to get out of this “sea of debt” you find yourself in. To do so, get to know 5 tips to learn how to get out of debt (and never go back into it):
Believe me, there is always a way out
There are those who, in moments like this, prefer to give up everything. But if you are reading this content, it’s because deep down you have hope and you know you can turn around.
Congratulations, you’re right! No matter how big your debt is today, you can pay it off and we’re here to help.
Calculate hole size
Strange as it may seem, few people in debt know how to accurately answer the question, “How much do you owe?”. This is because people prefer not to know for sure the size of their debts.
Somehow this is less frustrating and less embarrassing. However, you cannot defeat an enemy without knowing them.
Therefore, you need to write down, on a spreadsheet or on paper, the value of each of your debts. To make sure you haven’t forgotten anything, check your credit history with major credit bureaus.
Count them all. Now you’ve started paying off your debts for real.
Don’t create new problems
Decide that you will not take on new debt now. In fact, any payment plan will only work if you don’t form new accounts while paying off old ones.
So make a commitment not to generate unnecessary new debt until everything is paid off.
Experience the power of the “debt snowball”
Typically, a mountain of debt starts to creep in when you ignore minimum payments and small debts. So the idea of the snowball is to reverse this process by doing the exact opposite.
Make the minimum payment on each of your debts and settle the smallest debt of its present value. The following month, you will have one less debt and that will be the case for the next few months.
Over time, you will see your “snowball” getting smaller and smaller. However, don’t stop until that one is gone.
Use all the strength
Cut out dinners, events and all other extra expenses. Replace your current entertainment with cheaper or free options. Stop investing in stocks or anything else for a while.
Find ways to make more money on the internet, providing a service or selling a product. So, do everything you can to earn more money to settle your debts as quickly as possible.
Finally, study personal finance and learn to manage your resources responsibly. In effect, this can reduce the chances of you going into debt again to 0%. You are capable of it.