Anyone who has ever been weighed down by debt, knows that this can be an extremely stressful way to live. If you have been plague by a big debt load, however want to take steps to effectively pay it off, fortunately this journey begins by seeking out various methods of debt-relief that are specific to your needs.
While some strategies may be more beneficial to certain borrowers than others, many individuals in debt do have similar areas of concern when it comes to their finances.
With that being said, while your debt-relief plans may look somewhat different than others, here are 4 steps you can turn to in order to come out of debt and improve your financial position.
1. Cutting Expenses
While you may have heard of this strategy a time or two before, it can once again be found here as it is an important one. You can simply start by looking at your monthly expenses and going from there.
Specifically, you will want to take a close look at how much you are currently spending towards unfixed expenses. While your fixed expenses, such as your mortgage and other bills can not be reduced, there are sure to be plenty of other areas of spending you can cut back on.
Some of these may include, your cable, interest or cell phone bill, your groceries and household shopping costs. As well as there may be other areas such as gym memberships, as well as the amount you are spending on various ‘lifestyle’ and entertainment areas you can consider cutting back on.
When all is said and down, cutting back on these areas could save your hundreds of dollars each month. You can then use this money instead to pay down your debt.
2. Developing a Savings Plan
Once you have identified and starting cutting back on your monthly expenses, you will also need to compliment this by developing a plan for saving. While cutting back on your spending helps to free up the additional money you need, you may also want to come up with a specific plan for how much you save and how you will save, perhaps even ‘where’ you will save.
For example, you may conclude that you are able to save an extra $300 each month and will then use this to pay off more of your debt. You may also opt to transfer this money to a designated savings account, so that you do not risk spending it.
All in all, coming up with a specific amount to save, as well as identifying how much debt you want to have paid off within a certain time frame, will benefit your overall debt-reduction goals.
3. Paying off High Interest Debt First
On top of making decisions based on how much and how long it will take you to pay down your desired amount of debt, you can also step up your debt-relief by opting to pay off debts with the highest interest rates first.
Regardless of the type of debt you have, it is still likely that you will have a loan or a credit source that carries a relatively higher interest rate than the rest. Many times, credit cards are the culprits for higher rates, and therefore as a part of your debt payment plan, you may want to target the credit card debt first.
Upon saving the desired amount of money, you can then use it to pay off your credit cards as the high interest is likely to be a huge reason that your debt is increasing at a faster rate. While your other debts may be creeping higher as well, they are likely to do so at a slower overall pace. However, it is the high interest debt that shoots up too fast and is far too quick to get out of control.
Ultimately, the sooner you can get rid of the high interest debt, the more effectively you can pay down your debt and start making a larger impact with your debt relief.
4. Finding Ways to Generate More Income
Finally, it also never hurts to find ways to earn some additional money. While step one may have allowed you to save more money, the reality is that you may need to access even more money to pay down your debt.
If you are already earning as much as you can from your current job, you may want to look for ways to increase your income. While this doesn’t necessarily mean you have to get another job, it can however, mean looking for ways to generate some more money, such as selling some of your gently used possessions on sites such as eBay and kijiji. even opting to have a garage sale or sell items on consignment.
If you are however, in the position of taking on some extra work, fortunately there are a variety of convenient options to choose from. For example, online work is available in various fields such as freelance writing, education instruction, as well and consulting opportunities. You may also look to work on the weekends and in the evenings doing work such as tutoring or teaching music lessons, if that is in your wheelhouse.
All in all, the type of work or income source you find will be unique to your time and your skill set. It is however, important to remember that there are options for you if you are seeking some additional money to pay towards your debt.
If left alone, debt can become a large dark cloud that hangs over our heads and threatens our livelihood. For this very reason, no one wants to deal with this ongoing burden.
While it is true that debt can be somewhat paralyzing, the key is to look for ways to manage and to pay off your debt as soon as possible.
Thankfully, as you can see, there are ways of doing this and steps you can take to improve your financial position starting immediately.