Whether you’re in $300 or $30,000 of debt, lowering those balances or paying them off completely should be the top priority. Debt can keep you chained to the whim of your lender(s), and just out of reach of financial flexibility and freedom. Here are five realistic ways to start lowering that debt and working towards a sustainable future.
Create A Budget: And Stick To It
How many times have you been in a store and thought: ”I can afford just this little thing”, and ended up spending way more money than you know you should have? A simple budget can do wonders for debt reduction and curbing spending.
When you create a budget, you’re saying “I’m going to live within my means”. This is essential to cutting down your debt. Your debt to income ratio is how much debt you have vs. how much money you bring in. Whichever is higher can have a massive impact on how you spend and manage your money.
Budget your necessary expenses first. Things like rent or mortgage payments, car payments, credit card payments, groceries, and gasoline. Make sure these get paid first, and budget out whatever is left for the not so necessary expenses such as phones, internet, and excess spending on eating out or impulse buying.
Once you’ve created your budget and stuck to it for a few months, you’ll find that you have more capital to work with, and can truly begin chipping away at those debt balances. Once they’re gone, stick to your budget and you shouldn’t need to go into debt ever again. It’s all about finding that balance between what you need and what you want. Sometimes differentiating the two can be difficult.
Re-Shop Monthly Payments Such As Auto and Home
Often, there’s a better deal waiting out there if you just research it. If you’re in a mortgage payment plan, car payment, or other monthly payment, you can search for other options that may reduce your interest rate or monthly payments. This can extremely helpful, especially to those living on a budget when a few hundred dollars can make a huge difference in their financial situation.
Many auto loans can have high interest rates if you bought your car at a time when your credit was low or you had no credit established. Finding a good auto loan will require some research, but if you’re able to reduce your payments by even $50, that’s an extra $50 going into your pockets and not to your lenders.
Manage Your Food Expenses Better
With busy schedules, it’s hard not to fall into the trap of eating fast food often. It’s quick, convenient, and so good! Besides being bad for your physical health, eating out all the time can add up and quickly become an expensive habit. Cutting fast food out of your diet can help your wallet’s health as well, giving you more money to work with for paying off debt and managing your expenses.
Besides buying ingredients to cook at the grocery store, there now exist many meal subscriptions that get delivered straight to your door, as healthy alternatives to fast food. The plans let you pick what foods you want to eat, so you’re only paying for exactly what you want.
You can also make coffee at home, or fill up your mug at a convenience store for far cheaper than instead of dishing out 5 or 6 dollars a cup at an overpriced cafe. Preparing yourself a meal the night beforehand, and getting a timed coffee maker can save you a large sum of money over time. If you think about it, if you spend $5 every day on coffee, that’s $150 per month on java alone.
Curbing your spending is the best way to begin paying off your debt. You want less money going out, and better direction and focus for the money you must send out.
Don’t Max Out Your Credit Cards. Pay Them Off and Cut Them Up
One of the biggest mistakes people make is getting carried away with their credit cards and maxing them out. Often the maximum limit is in the thousands of dollars, plus whatever interest you’ll have to pay on the purchases you’ve made.
Stop spending on your cards immediately, and start paying them off. Make more than the monthly payment every month, get that principal balance paid off and cut them up. Cut up those cards and close the accounts. It’s nearly impossible to stay out of debt while you have an open line of credit.
The temptation to spend just a little can quickly build until you’ve made a dozen “little” purchases and are suddenly back in debt. Live within your means. If you must have a credit card to build your credit, or for emergencies, don’t carry it with you in your wallet. Leave it at home in a secure location and only use it when absolutely necessary.
Staying informed means not only staying on top of how much you owe to your lenders, but also being aware of debt management options, consolidation services, and financial advice. You can visit sites like Get Out of Debt for debt management advice, and your bank may offer consolidation loans.
It’s important to know your rights as a borrower as well, and what a lender can and cannot get away with. Stay informed, stay on top of your expenses, and you’ll be heading towards financial security in no time.