Debt is, most of the time, a double-edged sword. We use it to make investments in the future, but sometimes we “invest” so much that we find ourselves in a bottomless pit of debt. Once you get caught in this vicious cycle of debt, it’s not easy to get out.
If you want to learn how to get out of debt, the first step would be to admit that you have a problem. Just saying “Nah, this isn’t anything major” won’t make the debt go away. If anything, the hole will go even deeper. Once you realise that you need to get out of that debt to live a good life, it’s time to start working on solutions.
- Understand Your Finances
Know thy enemy. If you want to know how to get out of debt, you have to know precisely how you got there. What is your current income? Where does all the money go? Does it go on necessary expenses, or do you just spend too much money on stuff you don’t need? To get good info, you need to keep track of your spending for a month or two. Here are some tips to do that.
- Pay with a debit or credit card so that every time you make a transaction, your account will keep an electronic record of everything.
- Keep the receipts for every expense that you make
- Always have a pen and a notepad on you (physically or virtually).
Always make sure that your irregular expenses are included in case you make your payments online. This way, you won’t be taken by surprise.
- Make Your “Spending” Plan
Based on your income and how much money you’ve been feeding off, make a minimum budget that you know you’ll be able to live with. Start with your basic needs: how much you’ll need for food or housing. Make your budget based on some priorities.
You may also want to make some changes in your life: spend less money on social gatherings, get rid of your cable plan, take the bike to work and get a cheaper phone subscription. All these savings will add up in the future, and this way, you can learn how to get out of debt.
- Hide the Credit Cards
While using your credit card may be a good way to keep track of your expenses, it is also a double-edged sword. Every person that knows how to get out of debt will tell you that credit cards bring even more debt. Why? That’s because a lot of them have high-interest rates that you’ll end up paying extra. Moreover, those who pay with credit cards are known to spend more money that those who pay with cash. So, next time you go out grocery shopping, hide the credit card.
This is how to get out of debt if you are already caught in the cycle. It won’t be easy, but as long as you keep up with the plan, you’ll be able to manage your situation. If your credit is suffering because of your debt, then you may want to check your credit. We can help you fix any errors on your credit file and improve your credit where applicable.