Getting out of debt can seem like an insurmountable problem. Your debt keeps growing and your income doesn’t rise to match it, and things slide out of control. However, there are simple strategies that can help you to get out of debt and then stay debt free.
1. Identify Your Financial Goals and Create a Payment Plan
Getting into debt is easy; you don’t need a plan. All you have to do is spend, spend, and spend. Getting out of debt is difficult and the more debt you have, the more difficult it is to escape.
If you want to get out of debt, you need a plan. Being in debt can feel like you’re lost in an ocean, but a plan is like a lifeboat guiding you to safety. A plan brings back some control over your financial situation.
Begin by identifying exactly how much debt you have and who you owe money to. Review the specifics of each lender, and prioritise who needs to be paid off first, second, third, etc. Next, identify how much you can pay off each week; subtract your expenses from your income and the remaining amount is your disposable income that you can put towards reducing your debt.
Now that you know who you owe money to and how much is available, you can plan the payments you’re going to make. This won’t only make it easy to identify your weekly payments, it will highlight when you can expect to be debt free – the light at the end of the tunnel.
2. Realign Your Spending Habits to Your Financial Goal
A payment plan will help you to realise your financial goals but sticking to the plan can be difficult. To make sure you have the set amount of disposable income available to pay your loans, you may need to adjust your spending habits.
This means making sacrifices. It is not the time to buy a bigger, fancier house. It is not the time to buy a new car and it is definitely not the time to go designer clothes shopping with your credit card. If there are unnecessary expenses – then avoid them. Until you pay off your debts, don’t go out for dinner – cook at home instead. Don’t go to the movies – rent a DVD – and don’t buy a new TV; make do with the one you have.
These sacrifices may be frustrating now, but they will make your financial future significantly brighter.
3. Create Automatic Payments from Your Bank Account
Automatic payments will take the hassle and some of the pain away from paying down your debts. You don’t need to actively move your money, it’s done for you. This is also very beneficial when you are paying your debt down in small amounts. It is easy to rationalise skipping a payment because the amount of money is small, but this hurts you in the long run. You’ll be amazed how quickly small payments add up over time.
4. Negotiate with Your Creditors
Banks and other creditors can be intimidating and seem like the last people who will help you. It’s true they aren’t going to help you out of good will, but helping you can be in their best interests. A bank may be willing to reduce your amount owing if they feel they have a better chance of receiving money – as opposed to you declaring bankruptcy. So contact your bank or credit card provider and see if they are willing to reduce your outstanding debt or interest payments.
5. Consult a Professional
Seeking guidance from an industry professional can make this process significantly smoother for you. They have helped many Australians in your situation and know even more hacks that will apply to your unique situation. If you want to be debt free, a professional can help. You can contact Revive Financial for assistance on reducing your debt. Simply call 1800 861 247 to discuss a brighter financial future.