So, have you been searching online for tips for getting out of debt? The good thing is that you are in the right place. I understand exactly how stressful it is to live in debt. Most people can’t get rid of their debts simply because they don’t know where to start. This is a totally understandable scenario especially if you don’t have a financial advisor. Often, no matter how much you try to live within your means to cover up the cost of paying your debt, you still fall short. Interest and other charges keep piling up until they’re way higher than the principal.
#1 of 3 Tips for Getting Out of Debt: Know your budget and track your daily expenses
Engineers and architects don’t build a house without a plan. The same goes for your finances. You must have a budget because it is your financial plan. It gives you an idea where your money is going. You can either have a journal to write it on or download an expense tracker where you can input your daily expenses. Begin on the first day of each month and review your expenses by the end of the month.
You can follow the 50/30/20 rule of budgeting. The 50% for needs, 30% for wants, and 20% for savings. If you do tithing, you can modify it to 50/20/20/10. Do a 10% deduction from the wants.
The needs cover food expenses, utilities, housing, car payment, health insurance, and debts. You can spend the budget for wants on travel, hobbies, and shopping. This allotment will still allow you to enjoy life while paying debts. You don’t really have to feel deprived although some people prefer delayed gratification. They sacrifice their wants and roll this budget over debt payments. The percentage for savings include your retirement funds and your emergency funds.
You don’t need to complicate this step. Use one page of your journal for each day of the current month. Write down your budget for the month and subtract whatever you spend your money on. This applies down to the single cent that comes out. If you haven’t spent all your budget by the end of the month, roll it over to your debt payment budget the following month.
#2 of 3 Tips for Getting Out of Debt: Pay Off The Smallest Debt First
A smart way to have regular payments on all your debts is to pay the minimum for each. The remaining budget for your debts should then be spent paying for your smallest debt. So, it is important that you order all of your debts from smallest to largest. Once you pay of the smallest tackle the next smallest and so on. The cycle goes on for the rest of your debts until you are debt-free.
#3 of 3 Tips for Getting Out of Debt: Create Another Stream of Income
This is often the thing that most people do not consider. Although this might not work for everyone, I suggest you try looking for a side income if you can. Use the extra money you will earn from a second job or a part-time business to pay off your debts. Perhaps you can capitalize on your hobbies or skills. Try selling your paintings or handcrafts. You can also do freelancing jobs online if you love writing or doing graphic designs. Once you are out of debt, you can scale back to your normal life or continue doing this side income opportunity. You can either save your additional earnings or invest it if you decide to continue.
Paying Off your Debt Takes Time But It’s Worthwhile
Getting out of debt surely takes time but it’s definitely worthwhile. Although there is no single step-by-step formula, there are proven tips for getting out of debt. You can give these tips a try and see how it helps you overcome your financial hurdles.