Being in debt can be unpleasant and stressful but it doesn’t have to last forever. With an appropriate plan in place, you can revolutionize your finances and live a debt-free lifestyle. If you want to make 2020 the year you fix your finances, take a look at these suggestions below.
Understand Your Finances
Before you can compile a sure-fire strategy for getting out of debt, you need to have detailed knowledge of your financial situation. It can be easy to bury your head in the sand when your finances get out of control but being pro-active will help you feel more confident.
Take a look at your most up to date statements and make a note of how much you owe and what the relevant interest rates and payment terms are. Following this, look at your income sources and calculate how much you have coming in after taxes. Finally, compile a budget of your monthly expenditure, including utility bills, grocery shopping, and entertainment. With this information, you’ll have everything you need to begin your journey to debt-free living.
Cut Out Unnecessary Costs
If you’ve lost track of your finances, there’s a good chance you’ll be paying for things you no longer use or need. On-going subscriptions are a common culprit, so look for gym memberships and streaming services you don’t use. By cutting these out, you could save hundreds of dollars every month.
Similarly, you’ll want to look for cheaper ways of doing things. Buying in bulk may seem expensive at the time but it could reduce your outgoings on a monthly basis, for example. Instead of buying lunch at work, take something to eat with you and use an insulated mug to avoid expensive trips to the coffee shop. You’ll be surprised how much you can save by making small changes to your lifestyle.
Look at Repayment Options
Next, look at where your money is going. Are you generating late fees for credit card payments every month? Do you pay extra when you can’t make the minimum payments? If so, you can keep more of your cash by negotiating better payment terms. Although it’s usually best to pay off your debts as quickly as possible, missing payments can decimate your credit score. By making your payments affordable, you can protect your credit score and dig yourself out of debt.
If you can afford it, it’s generally best to pay off more than you have to each month. By making more than a minimum payment on a credit card, for example, you can minimize the amount of interest you have to pay in the long-term.
For other types of debts, it’s important to look at the terms of your agreement. There may be early repayment fees to pay on a loan, for example. By calculating the repayment fees and comparing them with the potential interest you’ll be paying, you’ll get an idea of what the best course of action is.
With free, professional help available, you can access specialist advice to help you create an effective and sustainable repayment strategy.
Liquidize Your Assets
One of the easiest ways to get out of debt is to liquidize your assets and pay off some or all of your debts. As a homeowner, your property is probably your biggest asset. By selling it, you can release the equity, find somewhere else to live and still have enough to pay of a good chunk of debt.
Although people assume selling a property is expensive, it doesn’t have to be. If you want to avoid inspections and repairs when selling, you can sell your home without using a realtor, for example. By avoiding these costs, you can sell your home more quickly and keep more of the equity when the sale is completed.
Target The Essentials
Split your outgoings into essential expenditure and luxury purchases. You need utilities, food and a roof over your head but you may be able to cut back on going out to eat and holidays. Living frugally doesn’t have to be boring but reducing your expenditure is key if you want to get out of debt.
Also, take a look at the debts you have. Are they secured or unsecured? Most people consider secured debt the most serious as it puts your assets in jeopardy. However, it’s important to get professional advice if you’re struggling to make payments or want to use some time of consolidation loan to make your debts more manageable. By prioritizing your secured debts and high-interest debts, you may find it easier to get out of debt more quickly.
Living a Debt-Free Lifestyle
As your debts begin to decrease, don’t be tempted to splurge again. Living a debt-free lifestyle takes self-control but it beats living with financial worries. By making money-saving fun, you’ll find a range of creative ways to sustain your new, debt-free lifestyle.