One of the worst things that could happen in our adult lives is to be buried under a massive mountain of debt.
Firstly, debts have interests, and because of this, you’re actually going to pay more than the original cost. And when you have accumulated debts from everywhere, you’ll have to pay all the time, thus hindering you from saving money and reaching your other financial goals.
Because of all this, it is essential for you to make sure you can pay off your debt as soon as possible. But how exactly do you get out of debt? Here are 5 ways to help you get and stay out of debt.
- Paying Off Debts from Smallest to Largest
If you don’t know how you should start paying off your debts, it is best to focus completely on one debt at a time, from smallest to largest. Dedicate as much of your extra income as possible to the smallest of your debts until it is completely eliminated, then focus on the next smallest, and next smallest, and so forth.
If you have multiple debts with monthly minimums, this could mean paying your minimum on debts so you can focus as much capital as possible on your smallest debt to pay it off as rapidly as possible. Each time you eliminate one of your debts, you build momentum and confidence toward your financial goals until it is inevitable that you succeed.
- Try Out Debt Consolidation
Debt consolidation, which is another valid method, entails getting a loan from a bank and using that loan to pay off all your current debts. This way, you will only have one debt to pay off for the time being, which is more manageable than having multiple debts at once.
Consolidation loans have the potential to make things even worse if behavior that led to the debt originally doesn’t change. A written budget must also be in place if the consolidation loan is to serve its purpose.
- Make Small Payments Now and Then
Typically, you have to pay debts every month. But it might be better if you don’t wait for the month and instead start making small payments frequently, like every week. This is because small payments will add up, and that helps pay off your debts faster.
- Make a Budget or Spending Plan
Budgeting is the perfect tool for managing your money and holding you accountable.
When you create a budget, write down your monthly income, how much you should spend per month, and then write down every expense to track where your money is going.
Once you’ve made a budgeting habit, you’ll soon find yourself more responsible when it comes to financial matters.
- Increase Your Income
There are two ways to increase your “income”. The obvious first way is to find a way to bring in more money with a second job or job change. The second way is to retire debt and eliminate payments. Each time a debt is retired and a debt is eliminated it is just like getting a big raise.
When both of these strategies are done concurrently, it accelerates the process of becoming debt free and staying debt free. This frees up money so you are in a better position to build wealth.
The last thing you want to happen in your life is to accumulate so much debt. The five methods mentioned above are some of the tried-and-tested methods in getting out of debts.
So, follow these methods, and soon, you’ll find yourself debt-free. For more financial advice and information from Firefighters Credit Union, give us a call at 608-784-9480.