Our greatest is not never falling but rising every time we fall .
The first thing to remember here is that you are not alone .
Around 73% of North American consumers have debt. Around 68% have credit card balances. Most people have debt of some sort , its how our Western society functions today. Mortgages, credit cards,auto loans,personal loans,student loans, pay-day loans………… so on and so on .
When dealing with any personal issue, you have to first recognize there is a problem and you have to want to solve it .
If you are one of those people who are ok with their levels of debt and managing it correctly, then great. stop reading here and have a great day.
The fact that you are reading this article ,tells me you are likely to have an issue with your levels of debt and are looking to solve them .That leads us into the first stage:
1/ Record your spending for a 3 month period.
For this period of time, record all your income and all your spending. Make yourself a spread sheet or even just record it in a book. Separate into areas of spending, such as Household bills Motoring, Groceries, Entertainment, Insurances and most importantly, how much your debt is costing you each month?
In other words what interest are you paying on each debt, each month ?
2/ Target the Most expensive debts.
Once you have recorded your spending for 3 months, you will be able to understand which of your debts is costing you the most money in interest. Now I am not talking about mortgage debt here. Lets focus on the unsecured loans, likely to be your credit cards that have most interest ( APR %) Use this information to make a “hit list” of debts. Make sure you pay each one on time, but focus every available spare cash onto the most expensive one. Once this one is paid off in full, these funds should then be transferred onto the second most expensive debt and so on. This is the reversal of the “snowball” effect of how they got to be out of control in the first place.
3/ Reduce all Un-necessary expenditure
Your 3 month record of spending will show Where your hard earned cash was going? I was amazed how much I spent on things I didn’t really need. Not just larger ” one off” purchases, but multiple small purchases that go unnoticed until the monthly totals are added up. Once these are stopped the extra money can be allocated to your debt management.
4/ Set up an emergency cash fund
This will not directly reduce your debt, but will stop any credit card debt increasing . Stuff happens. That”s a fact. In order for you to stop dipping into your credit limit every time some un planned event happens , set up a cash fund to help when stuff goes sideways.
5/ Spend Smarter.
Everyone has to spend money at some point. Price check, coupons, internet shopping, sales there are many ways to find what you need at a reduced cost. Stick to buying what you need and not emotional purchases, i.e wants!
You will feel better at the end of the month when you add up the cash you saved by doing this.
6/ Improve your credit rating
There are ways you actually improve your credit rating. When your borrowing is reduced to a reasonable level, lenders will be keen for you to take up their services once again. This time use it to your advantage. Contact your existing lenders and try to get better terms by lowering your interests rates. Failing that, go to an alternative company and transfer your debt at a better interest rate. It may seem like a lot of hassle at the time, but even a small decrease in interest rates will reduce your costs over a period of time.
7/ Increase Your Income
Change jobs, negociate a pay rise,work extra overtime, get a side hussle, rent out a spare room or even buy and sell items for a profit . Use your imagination, but obviously the extra money you generate must go to your debts.
8/Sell unwanted items for cash.
We all have have things we don”t use or need anymore. Find them , clean up and advertise them locally. Put the cash down on to your debt . Simple.
9/ Set a time scale and a realistic goal
Progress maybe slow to start with but as debts are reduced the speed of progress should increase. You are more likely to succeed ,if you give yourself a realistic time scale and monitor your progress to keep yourself motivated.
10/ Set a future Budget
Hopefully by the time you have reached this stage your debts are under control and life is easier. Time now to prevent it happening again. Set yourself a budget and keep monitoring your income and expenditure. to prevent a build up of debt in the future.
Never underestimate the importance of abandoning crap you don”t need!