If you’re in debt and finding it hard to cope, it’s important to deal with the problem straight away – the longer you ignore your debts, the worse the situation becomes. There is no big and clever secret to getting rid of debt. To eliminate debts, there is more than one way to skin a cat, however, any person who has the experience of debt elimination will tell you that you must understand and implement the following three basic principles:
- Spending less
- Earn more money
- Pay off debts as much as you can
Some people compare weight loss with paying off debt: In order to lose weight, you need to eat less food, do more exercises, and stick to your dieting plan; to get out of debt, you need to spend less, try to earn more money and stick to your debt elimination plan.
First you need a plan
Take a blank sheet of paper; draw a line in the middle. On the left hand side, write down your monthly incomings, including your salary, income from investments etc. On the right hand side, write down your monthly outgoings. When listing the outgoings, it’s a good idea to put down all your essential outgoings first, such as mortgage or rent, utility bills and so on. And then write down your debts and other spending. If your outgoings list adds up to more than your incomings then you must look at your debts more seriously and take action right now. Otherwise, they will eventually snowball to a level beyond your control. After you have listed everything, brainstorm and draw up a plan with the above 3 principles in mind. Decide on the order of things to be tackled. You should always pay the bills that keep the roof over your head first, and then use the left over money for other purposes.
There are only two ways to cut down your monthly outgoings. Buy cheaper things or don’t buy at all. Spending on non essential items, such as a new car, a holiday abroad, or even a new pair of boots, should be avoided all together. Tell yourself if you are in debt, you don’t deserve expensive things. Only allow yourself to buy what you need, not things that you want. However, to boost your morale in this battle against debts, you could give yourself some small “rewards” from time to time, when you’ve achieved a financial target that has been set for yourself.
You have to buy essential things such as foods and fuel to survive, however you should always try to buy them cheaply. Buy cheaply doesn’t always mean low quality though. If you shop regularly in a supermarket, use their reward membership card, collect points and spend them to get discounts. Supermarket have items on sales all the time. Buy items that are on sale; buy non perishable items or those with long expiry days in bulk when they are on offer; buy the cheaper versions of the same thing, such as the supermarket’s own branded items; use price comparison websites to find a better deal for your electricity, gas, insurance and so on.
Learn to cook. If you don’t know how to, start learning it now, it can be easy, fun, healthier and rewarding. Eating out is way more expensive than cooking at home. You should avoid it unless you have to for social or any other reasons. You are looking at spending at least 3 – 5 times more money if you only eat out compared to if you cook for yourself. Don’t buy any item that you can borrow or exchange from your friends and families, or your neighbors. For example, books, CDs, DVDs and tools etc.
Earn more money
You may say “I don’t know how to make more money. If I did, I wouldn’t be in debt like I am now.” That is not necessarily true. Most people are in debt, simply because they don’t know how to spend according to their income. They are probably more in debt if they know how to earn more money.
If you are employed, can you get yourself an increase? You may want one, not for the reason that you are in debt, but because you always deserve one, yet you have never asked for it. Is there an option that you can do overtime for your employer in order to get some extra pay? If so, do it. You need money to pay off your debt at the moment, even if it means you have less free time; it’s worth it in the long run. Could you find a part-time job in the evening or at the weekend? Have you have special skills that you can offer your services for cash? You can list your services in your local news papers and websites such as Craiglist for free or at very low costs.
Pay off your debts as much as you can
When you follow your cost cutting and money making plan, you will probably end up with surplus of money each month after paying all the bills and debts. If you want to get out of debt fast, with the left over money, don’t be tempted to spend it. Use it to pay off your debts! List your debts and order them by their costs (interest rate), and then use your money to pay against the most expensive debt first. The more you pay off, the less interest you are accumulating in the next month, the quicker you will get out of debt.
Change your way of thinking
It might sound fanciful, but it is really worth doing some work on your way of thinking. Ask yourself questions such as “Why am I in debt?” Are you in debt because that you have an unreasonable expensive taste? Or is it because that you are trying to spend more in order to satisfy your psychological need? There are lots of reasons why people are in debt, knowing them and trying to avoid the avoidable is one way of eliminating the possibility of being in debt. If you cannot afford something now, don’t automatically think of getting a loan or put it on your credit card. Save up until you have enough money to buy.
If you still struggle, after all these efforts, you might want to seek help and advice from professionals. There is a good guide on the USA.gov website for how to seek credit counselling help when your debts simply go out of control.