Here are several suggestions to assist you in getting out of debt.
Survey All Your Debts
The first step is to determine to whom you owe the money. Create a survey that includes the forms of debt, the creditor (the person or firm you owe money to), the original and current amount of debt, the CET (Total Effective Cost) of the loan, including interest and fees, and the debt term.
Sort your debts by the interest rate in descending order (highest interest to lowest interest). It makes it easy to decide which debts to prioritize throughout the negotiation.
Analyze Your Financial Situation
Here, it would help if you thoroughly examine your whole financial situation. For 30 days, track everything (even small costs like coffee and tips) to determine where your money is going.
Answer the following questions:
- How much do you earn in a month?
- How much money do you spend each month?
- How much of your money is in debt?
- How much money do you spend on fixed and variable expenses?
- How much money would you need each month if something unexpected happened (such as losing your job)?
Notify the Family
The entire family must be aware of the financial situation, as everyone must be involved in cutting expenses and searching for alternatives to find sources of extra income.
Cut all Unnecessary Expenses
When people are in debt, they must learn to tighten their belts and adjust their spending to their income rather than the other way around. Examine all costs to discover where you might achieve savings and reductions. Remove anything unnecessary: gym memberships, subscriptions to services and goods, and trips to the beauty salon. Make use of free leisure opportunities.
Know that Credit is Not Part of Your Income
Your income is what you receive at the end of the month. After deducting any discounts, that is what you should learn to utilize instead of adding to the limit on your overdraft or credit card. You probably already understand why you’re in debt if you labor to pay your revolving card and can’t cover your overdraft.
Reinaldo Domingos advises preventing overdrafts and keeping credit card limits lower than your salary if feasible. He recommends taking half of the profit.
You can use a credit card if the invoice amount is paid in full when due.
Build an Action Plan
Create a priority list to determine which debts will be paid or negotiated first.
You must prioritize payments for critical bills to prevent disrupting the delivery of vital services such as water, power, and health insurance.
Then, prioritize bills with the highest interest rates, such as overdrafts and revolving credit cards.
If you can pay a lower-interest debt, one option is to convert the very high-interest debt for a lower-rate obligation, such as a personal loan.
However, you must be conscious that you should only incur debt you can afford to repay. That is why doing math is so important.
Look for Extra Income
Sometimes, trimming is insufficient; even with all conceivable cuts, there is still a shortage of funds to pay off debt. If that’s the case, one option is to earn extra money. It might be with a job during off-hours, weekend breaks, or even sales.
You may get rid of goods you no longer need or make products such as cakes, sweets, and crafts to sell to friends, neighbors, or even on the internet. Find an activity that you enjoy and begin doing it.
Start Saving
Don’t save what’s left over at the end of the month because there’s never anything left when we’re out of control financially.
Save at least 10% of your paycheck as soon as it arrives in your account. Even if you cannot save this proportion first, start with any amount to establish the habit.
The emergency reserve should cover six months of total costs and be the first savings established. In this way, you might use the reserve money instead of getting into debt in the case of an unforeseen incident. Once you’ve used it, save again until you’ve saved enough to meet these months’ costs. You only begin to save for other goals, such as vacationing, replacing your car, or even preparing for retirement.
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