Getting out of debt can be an incredibly challenging and daunting task. It seems that banks and lenders have a vested interest in keeping you in debt for as long as possible, with the potential for them to profit from interest and fees.
However, it’s important to remember that debt can have serious consequences, affecting not only your own life but also those closest to you. If you’re one of the subscribers struggling with debt, this article may offer some helpful tips and insights to help you overcome this obstacle and achieve financial freedom.
The first thing to do when you are in debt is reduce the amount of money that you owe. Therefore you must create a payment plan and decide how much money you can afford to pay every month.
On experian.com in an article called How to Get Out of Debt by Evelyn Waugh you can read that making all these monthly payments on time can make the lender or the bank place you on the reliable payments list and it will keep you in debt longer. Naturally the quicker you can get out of debt the better!
I am aware of the fact that this might be a daunting task and Evelyn agrees with me. She writes that there is a good process to calculate how much money you are able to pay every single month.
Firstly, you need to figure out what you are spending money on every month and how much money you spend. This can be done fairly easily using a spreadsheet like excel or google sheets. The main things to calculate are what you spend on groceries, phone bill, petrol for your car, rent for your house, apartment or place that you are staying in etc.
Of course there are expenses that change from time to time like your electricity bill. One month you might use more electricity than another. To calculate things like how much money you pay towards the electricity bill calculate the average over several months.
Secondly, you should do a comparison of the amount of money that you make and what you spend. Don’t look at what you earn before taxes as that will result in the calculation being incorrect. When doing the comparison you need to subtract the total expenses from the amount of money you earn after taxes. For example the necessary expenses and the not necessary expenses.
If you find out that after all your expenses are paid you don’t have enough money left over to pay off your debt there are two options for you. Number one you have to cut down on your expenses. Or number two you have to generate more money.
Lastly you need to either supplement or increase the amount of money that you make. Find something on the side to make you money such as writing articles on Medium, delivering pizzas or doing surveys.
Personally I find it more difficult to complete goals when I don’t have a reason behind them. For many people it works exactly the same and therefore you need to find your reason for why you are getting out of debt!
In an article written by Jeanne Lee and Sean Pyles called How to Get Out of Debt: 7 Tips That Work there is a paragraph that states “ Do it yourself: Think about your financial goals in the near and long term. Whether you’re looking for a new house or saving up for a vacation, having a clear motivation to get out of debt will help keep you on track.”
In the article they used Brian Brandow as an example of someone who succeeded by finding his why. Brian had an epiphany of sorts in 2010 when he had to tell his family that vacation was canceled that year. He was 109000 dollars in debt and he had five maxed out credit cards.
To help resolve this problem the Brandow family created a budget and they cut their expenses massively. They also used a debt management plan that is defined as an informal agreement between you and your creditors for paying back your non-priority debts according to citizens advice.org.uk.
The canceling of the vacation and his three children motivated Brian to stay the course and regularly pay the monthly payments to get out of debt. Brian stated that he did not want to disappoint his family and that he wanted to create a better life for them.
Having a clear reason behind your goal of getting out of debt will keep you focused and aid you during the really dark times.
You may need someone to help you on your journey to being debt free besides family and friends. That is where a financial advisor comes into the picture.
According to investopedia.com the financial advisor can help you understand the different options available to you for getting out of debt. They can also find the best strategies for your situation. Finally they can be a crutch for you to lean on when you meet with the bank, lenders or creditors that you owe money to.
Nevertheless you must understand that these advisors charge high fees and not all of them have your best interests at heart.
In conclusion, getting out of debt can be a difficult but crucial step towards achieving financial freedom. Creating a payment plan, finding your reason for getting out of debt, and seeking the help of a financial advisor can all be valuable tools in this journey.
It’s important to remember that debt can have serious consequences and that taking action to reduce it can improve not only your own life but also the lives of those around you. By implementing the tips and strategies outlined in this article, you can take the first steps towards a debt-free future.
If you have any questions regarding this article feel free to contact us!