Everything we do in life is governed by principles. For instance, just as there are rules and regulations in playing football, body of laws guiding us in our various places of work, getting out of debts also comes with its own principles.
As simple as it may sound, it’s often not easy to get out of debts, and that’s why you need to follow the below steps.
Create a Budget
To get out of debt, you first have to create a budget for your expenses that will cover your bills, rent and mortgages. Once all these have been properly put in place, you’ll be able to figure out how much you really have left at the end of each month, how much you can spend, what to spend on, and what not to.
Once you’re able to do this, you will be able to control your finances, thus, have the power to create a plan that will help in tackling the debts you owe.
Draft a Plan
Once you’re done making your budget, and you’re finally in control of your expenses, it’s time to make a plan. And how is your plan going to look like? Focus on debts that come from secured loans first. What kind of debts are these? Those with a certain fixed interest rate that you can’t afford to miss paying because, failure to do so might cause you to lose whatever was attached to it, such as mortgage or car.
After keeping the secured loans on the top of your list, then go ahead to look at the unsecured loans like the educational loans and credit card loans. Now, the rule of thumb here is to pay off loans with the highest interest, so that you will be left with those that have low interest rate.
And if you happen to feel choked up, in having to pay the debts and your bills at the same time, consider seeking help from a family or acquaintance on your bills while you’re battling to clear off your debts.
Take a Consolidation Loan
If you would like to pack all your unsecured debt into one-fold, then you need to get a consolidation loan. But you should only continue using this option if it is actually saving you the cost of paying interest and others like the mortgage. If it is not helping you do that, then it sure isn’t an ideal option for you.
Nevertheless, once you get to this point in your life, you’ll have to cut off some unnecessary expenses like in your romantic aspect, cut down on unimportant spending, and anything you know won’t do anything but hip more cost on you. Basically, you don’t need such things during this stage of your life and beyond, so that you won’t go back to owing new debts, once you’re done paying the old ones.
You have To Be Creative
If we’re being honest with ourselves, you’d agree with me that most of our spending and extravagant lifestyle are always in a bit to impress others, perhaps our friends, neighbors, colleagues or partner and so on.
Well, if you must stand a chance of getting out of debts, you ought to stop living such a life. Rather, your concentration should be more on how you can bring in more income like in taking extra gigs, working for additional hours, learning new skills that will bring in some money at the end of the week or month, and just basically anything that will not drain you but add to your finances.
Your formula should always be (income greater than expenses). And if by chance any expense gets way above your income or
seems to be draining your financial capacity, do not hesitate to kick such out of your budget.
In summary, every debt no matter how big, can be cleared if done properly. The basic psychology is that you will need to be patient with yourself because the process is going to be a slow and meandering one. Nevertheless, if you stick to it by creating a budget, making a plan, taking a consolidation loan and try being creative, you will surely get out of the debt eventually.