There is a lot of material online that aims to help people get out of debt. Most people read it and move on. The reality is that you cannot dig yourself out of debt if you are consistently spending more than you earn. Just because you have a credit card does not mean that you should go ahead and start spending.
How Do I Get Out of Debt?
We all have different financial situations and they require different solutions. However, we can start by finding ways to increase our income and cutting down on expenses. Start budgeting straight away. Budgeting can do wonders to find hidden savings.
Spend Less Than You Make
If you want to find your way out of debt then it is time to put your spending habits under the microscope. If you are new to budgeting or donâ€™t like the idea of budgeting then simply start by writing down your daily expenses on a sheet of paper. Just start listing your daily spend item by item. At the end of the month tally your expenses and you will have an idea of your monthly expenses. You can go a step further by multiplying your month total by twelve to get an approximate annual expense figure.
I would recommend looking at your yearly expenses. You will be surprised by the results, that occasional trip to the restaurant or the cell phone plan may not seem much if looked at as a one-time cost. However, looked at as an annual expense it can be shocking at how much we spend on those extras. There are frivolous expenses that can go unchecked if not looked at in terms of a yearly expense.
Through this exercise, you should hopefully get a clearer picture of your spending habits and what makes up your expenses for the month or the year.
Pay More than the Minimum
If you are to have any chance of paying off your debt then you have to pay more than the required minimum. It will take you forever to pay off your debt if you make minimum payments. Pay off as much as you can each month, get as close as to the full balance as possible.
Use a Consolidation Loan
If you are finding it difficult to pay off your debt then speak with your bank about consolidating your debt under one loan that has a lower interest rate. This method provides one lower payment every month that you should aim for. You can pay off your debt faster by saving on interest. Always remember that just because you have consolidated your debt under one loan does not mean you donâ€™t need a budget. You still have to make debt payments and a spending plan is more important than ever.