Coping with debt is, undeniably, stressful. Hence, coming up with an efficient way of minimising your debt is more than welcome. On that note, we would like to give you a couple of suggestions on the topic of debt reduction. These creative hacks could genuinely help!
Create a Budget
For starters, you have to be serious about your financial goals. Evidently, you should know how much you earn and how much you owe. Afterwards, you should determine the amount you can save. That means you should operate within a budget. The difference between how much you make and how much you owe is the net worth. As soon as you’ve pinpointed that, the next step is working on a budget. The main goal of a budget is to allow you to differentiate between necessities and things you don’t need. When you compose those lists, make sure you consider the expenses that seem insignificant. Most of the time, those slightly unimportant expenses are the ones that add up.
Set the numbers you plan on spending for each designated category and stick to them. As soon as you’ve done that successfully, it means you have taken control of your finances. This is the first step that will help you to reduce your debt. There’s no such thing as getting rid of debt unless you are open to making changes in your spending habits. The goal here is to prevent your money from controlling you. On the contrary, you are the one that should have control over your finances.
Negotiate with Your Creditors for a Lower Interest Rate
For the most part, it’s the high-interest debt that makes you sink into debt. What is more, this type of debt is the hardest one to pay, because the interest rates might increase, which would further complicate everything. Obviously, this means you could greatly benefit from a lower interest rate, which would allow you to cope with making repayments significantly better. And you might get that if your creditors are open to negotiating. Therefore, you should consider discussing this aspect. You have nothing to lose; on the opposite.
On a different note, even if you don’t manage to obtain a lower interest rate, you should still aim at paying off your high-interest debt first, since it’s the one that’s slowing you down the most. Nonetheless, depending on your financial situation, this might not be the best strategy for you. For example, if you have small debt as well, you might concentrate on paying off the smaller balances first. This could actually free up more money you could put toward the high-interest repayments. And, of course, you should do your best at making timely repayments; otherwise, you’ll end up paying a lot of penalties.
Set Up a Savings Account
As soon as you get rid of your high-interest debt, such as your credit card debt, the last thing you want is to allow it to escalate again. From this point onward, you should concentrate on putting money aside. Although you may think that you are incapable of putting money aside, don’t dismiss it (at least, not yet). In fact, the next step in establishing a budget is to try to put money aside. This way, you don’t have immediate access to them, so that you can spend that money whenever you feel like it.
Come Up with Ways to Increase Your Income
Focusing on maximising your income has two major benefits. For starters, it means you won’t have to rely entirely on your credit cards in order to survive financially. And secondly, it allows you to direct more money into making repayments. If anything, it could also help you to make additional repayments, if the loan terms facilitate that; hence, significantly reducing debt. To that end, perhaps you should consider doing some freelance work, take on a second, part-time job, so on and so forth.
Organise a Yard Sale
The odds are you have a lot of stuff hanging around the house you don’t necessarily use. Such stuff is, more or less, money that has the potential of being liquefied. To that end, gather usable items such as clothes, furniture, toys, housewares and others, and organise a yard sale. Additionally, if you have valuable items you could sell, such as vintage articles, you can simply list them on eBay or other specialised websites. While doing so won’t necessarily solve your financial difficulties overnight, it will definitely help.
In summary, taking in the whole picture of your debt can be mind-blowing. Nevertheless, bear in mind that, if you take it one step at a time, things will get better, eventually. Make sure you make a budget, prioritise your payments, expenses, and, when you have the chance, you may set up a savings account. Monitor your process, celebrate even the smallest victories and don’t lose heart. Remain perseverant and you’ll be out of debt before you know it!