When you are facing a growing pile of bills that you cannot pay, easy may be the last thing on your mind. And it’s true that turning your financial life around is challenging, but there are proven steps you can take to do just that. The tips below might not make getting out of debt easy, but they can smooth your path.
Face the Music
One of the hardest parts of dealing with debt is facing how much money you owe. In fact, some people get into debt simply because they can’t bring themselves to open the envelopes they are receiving. This is a not a strategy you can pursue indefinitely, so your first step should be to go over all of those debts and figure out how much you owe to everyone. While you’re at it, note what the interest rates are as well since this may come in handy later.
Make a Budget
Getting out of debt does not mean you can never do anything nice for yourself again, but it does mean that you need to look at where you might be overspending so that you can cut back. Keep in mind that this is not just about shopping impulsively or eating out too often. For example, you might be able to reduce monthly expense obligations by refinancing your student loan with a private lender. If you can get lower interest rates, you will pay off the debt more quickly. You should also cancel any memberships or subscriptions you aren’t using and consider other ways that you can downsize your lifestyle until you get your debt under control.
Make a Plan
You could just keep throwing money at the bills coming in, but there is a better way to organize this process, and it will also help keep you more motivated. Essentially, you are going to focus on one debt at a time. This might be the creditor that you owe the least amount of money to if success in paying off one bill will give you extra motivation. Alternately, it can be whatever you owe the most in interest on, which will save you money in the long run, but which might be less inspiring.
While the latter approach is arguably the better one in financial terms, it is more important that you choose the one that will keep you on track. You should put most of your money toward that debt and just pay the minimum on the others. When you have paid it off, you should take the amount you’ve been paying and add it to the minimum of the second debt on your list and so on.
Make More Money
Either when you make a budget or as you are paying down what you owe, you may conclude that you need to make more money. There are a lot of ways to do this, from getting a new job to taking part-time work to pick up gig work. You might also have things you can sell, such as clothes, furniture, and books. Look into the possibilities online or with consignment shops, or consider having a yard sale.
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