When to ‘get out of debt’ is your priority at this point in life, this article is for you! Debt can seriously hurt your feelings of self worth and is just not a nice position to be in. Learn about ways to get out of debt and then just get started.
The speed at which you get out of debt depends on two major variables: what comes in and what goes out.
When your income is higher than your expenses, bingo, what’s left from your income goes to paying down debt.
Make an overview of income and expenses
First and foremost you want to have an overview of the amount of money that comes in and what goes out.
Start with listing what amount of money comes in from your salary, childcare benefits, extra income from a side hustle, etc.
Then list your expenses (mortgage or rent, insurances, food, etc,) and subtract the total of expenses from the total income.
The number you’re left with is the amount of money you can throw at your debt each month.
Negotiate lower interest rate
The succes of this first tip depends on how willing your creditors are to lower the interest rate, but it doesn’t hurt to ask.
I suggest to start negotiating with the debt that has the lowest interest rate (so you can practice before you tackle the one with the highest interest).
Why is negotiating a lower interest rate beneficial? Because this way less of your monthly paymenst will ‘disappear’ into interest charges.
When less money is lost in interest, paying off your debt will go much faster and when you see progress, this is really inspiring to go on and step it up.
Give the ‘debt snowball method’ a go
For getting out of debt you may have heard about the debt snowball method already. In case you haven’t, here’s how it works.
Instead of just paying the monthly minimum to pay off your debts, with the snowball method you step it up.
To get this going, make a list of all the debt you owe, starting with the smallest amount.
Now you pay the minimum each month toward all debts and throw the minimum plus what you can spare at your smallest debt.
This way you can pay this one off quicker and once paid off this not only gives you a great feeling, it also means you can now use the money you used to pay off this first debt for paying off your second smallest debt faster.
By continuing this procedure, you speed up the process of getting out of debt plus get to celebrate multiple victories on the way toward this.
Generate extra income
The amount of money that is coming in each month is limited, which means what you can throw at debt each month is limited as well.
Now you can save money by living a thrifty lifestyle, or you can generate extra income by getting an extra job or starting a side hustle.
Pay on time
Be sure to pay your installments in time in order to avoid any fees. When you automate the payments you can’t go wrong here.
Stop borrowing money
This is most probably how you got into debt and to get out of it (and stay out of it) remember to not borrow any money.
When you want something, save money for it. Yes it may take you years, but it will be so much more worth it.
And in addition, ask yourself: if you’re not willing to save money for years for something, are you sure you really want it?
Bonus tip: quit alcohol
When you drink alcohol, consider taking a 28 day alcohol-free challenge in order to figure out your relationship with alcohol.
Who knows, you might end up never drinking alcohol again and this is a good way of saving money.