Many financial experts will tell you how good it is to avoid debts. This is an assertion I completely agree with. It is a nice feeling living a debt-free life. Nevertheless, some situations can force you into borrowing money over and over again.
For instance, most people do not earn enough money to provide for all their needs and still save funds. In fact, many people live from paycheck to paycheck. A time always comes when the only place to turn to for help is borrowing either from banks or family members and friends. Borrowing is not a bad thing and no one should even demonize it.
I have repeatedly discussed some of the basic circumstances that makes borrowing really necessary. The problem is borrowing more than you can afford. Make sure to compare and check the interests by visiting this site Loan Advisor.
Are you overwhelmed with debt? If yes, what can you do to salvage your condition? Well, today we are going to simplify things by giving you some practical suggestions you can use to get out of debt even if you don’t make money. Let us start right away.
- Understand your financial status. Can you solve a problem you don’t know? For you to fix your financial problems, the first and most important steps are to understand your financial condition. In fact, one of the most effective debt repayment strategies is to start with high-interest debt. So, sit down and list all the debts you have and the payments you are supposed to make every month. What is more, analyze all your money sources. All other repayment plans can only be built on this requirement.
- Budget using 50/30/20 rule. We have talked about budgeting for so long and it is worth it. To be honest, no one likes the idea of making a budget. Why? For a simple reason, you are restricting yourself. But friend this is the only way you can control your debt. In fact, you cannot get out of debt if you cannot budget. One of the best budgeting strategies is the 50/30/20 rule. How does it work? It is very simple. You first need to calculate the income you carry home every month. To get this value, use an effective tax rate to calculate your monthly tax obligation and subtract it from your gross income. If you are not employed, your net income is the sum of all your earnings less all the taxes.
Once you have determined this figure, you will again split your expenses into fixed or essential and nonessential costs. The essential costs are those ones that you cannot do without. Basically, these are basic needs like housing and payments have to be made every month. In the category of needs, we also include any payment or a bill which when not settled can significantly affect your welfare. Spend a maximum of 50% of your net earnings on them. The nonessential costs include wants. While these are also important, they can be postponed without suffering significantly. Spend a maximum of 30% on these wants. The remaining 20% should go to savings accounts. Once you have created your budget, stick to it and let it direct your spending.
- Analyze your largest expenses and determine if it is possible to slash or trim the fat. You already know where you stand financially and you already have a budget in place. It is impossible to get out of debt if your debt is growing. So, look at your budget and see where you are spending just a lot. It could be on transportation or buying food. Then come up with a good plan of reducing the costs. For instance, if you spend too much on eating out, consider preparing your food at home. In fact, one of the best financial habits is avoiding unnecessary expenses such as buying food. What if the problem is transport costs? Consider using public transportation. The funds saved from trimming the fat should be devoted to settling the debt.
- Look for ways of supplementing your income. To accelerate debt payment, you have to look for ways of earning more. Can you work overtime? This a very good idea if there is a consideration for this in your workplace. Besides, there is always something else that we can do apart from the services we offer to employers. For example, you may have some additional skills, such as shoe polishing, article writing, or selling products. If you have such skills, convert them into a money earning activities and use the extra income to pay off your debt. More importantly, selling an item you do not use can earn you a lot of money and that is exactly what you need here. Do you have unused furniture or appliances? Consider selling them and use the proceeds to pay off the debt. Still, consider the kind of purchases you make. You don’t have to go for brand new products when you can get a similar second hand at lower costs. Whenever you want to purchase something, be humble enough to visit thrift stores or similar sites and you will save a lot of money.
- Make extra payments. It will be easier to get out of debt if you make payments that are more than the minimum requirement. If you keep making just the minimum required payment, you will remain in debt for so long. This is not what you want. We have talked about budgeting and regulating your spending. There are possibilities that you will always remain with unallocated cash. Use such amounts to make extra payments. Additionally, if you are using a debt avalanche approach, do not neglect other debts completely. As you attack that one debt with the highest interest, make some small payments on other debts to show commitments and to avoid penalties.
- Keep in touch with your lenders. Some lenders understand when things are tough for borrowers. In case you anticipate an inability to afford a payment, talk to the respective lender early lender. Your payment schedule can be rescheduled at some costs. Moreover, you can let the lenders that you would wish to settle debts faster and there are some helpful provisions.
Getting out of debt requires concerted efforts. You can manage if remain determined. Make it a goal to be free from debt in a certain period and use the tips we have discussed in this blog. I want you to always keep one Biblical say – bad association ruins useful habits. Surround yourself with friends with good financial behaviors and those who can respect your budget and not individuals who carelessly spend. We wish you the best. Thank you!