A Get Out of Debt Strategy That Works
You’ve decided this is the year you’re going to get out of debt once and for all. You’re committed, you’re determined, now the only thing you need is a plan. There are many plans for debt reduction, but they all generally include the same elements. Debt accumulates over time for a variety of reasons. So, it is expected that time will be required to reduce that debt as well.
Be patient and take it one step at a time…you’ll see results.
Get a clear picture
You have to understand the reality of your indebtedness. It’s impossible to make a plan to reduce debt if you don’t know the extent of it. Be honest. It does no good to deceive yourself about the amount of accrued debt.
Stop digging the hole
Don’t accumulate more debt. It’s a never-ending cycle with no way out. Spending habits must change for any plan to be successful. It’s crucial to live within your means, (below your means preferably,) in order to apply that money to debt repayment.
Build an emergency fund
Plan for emergencies first. A savings cushion is imperative for several reasons; it will allow some small modicum of security, you will be prepared for a crisis, and you will have liquid reserves for those instances when only cash will do.
Figure out where the money will come from
Track your spending for a while if necessary. Create a budget or if you prefer, call it a spending plan. Make cuts where possible, but be sure to make it livable. A budget does no good if it’s not possible to stick to it.
Increase your income if possible.
Take on extra work where available, volunteer for overtime, or find a second job. Most people don’t want to hear that, but if you seriously want to eliminate debt, sacrifice is necessary. The extra effort will pay off, literally.
Liquidate other assets
Consider liquidating other assets. Experts don’t recommend taking money out of a retirement funds, because that will have serious repercussions in the long term. Taking out a second mortgage is the most common tactic, but be careful before you do that. Only resort to borrowing further against your home if you can firmly commit to stopping the cycle of overspending, otherwise you will just accumulate more debt. You are putting your home at risk, so make sure it’s worth it.
Do you have any investments or possessions you can sell?
While you may be earning interest on your investments, if it’s less than the interest rate on your debt, they may be worth liquidating Consider selling unnecessary equipment, (boats, extra cars, etc.) or valuable jewelry if it doesn’t have extreme sentimental value.
Decide on a debt reduction plan
There are many methods to reduce debt. None is better or worse than the other. It’s a matter of choosing what’s the most comfortable for you. Money is a very emotional thing, and so debt reduction is partly mental. Find a plan that you can commit to.
One option is to pay off the credit card or loan with the smallest balance.
Be sure to make the minimum payments on other debts, but concentrate on paying off one debt at a time. Once the smallest debt is retired, move on to the next smallest. The advantage of this method is mostly mental. It allows you to gain momentum and the sense that you’re making progress.
Another option is to pay off the debt with the highest interest rate.
This is generally the most financially advantageous. By eliminating the higher rate credit cards, you’ll reduce the amount of interest that is paid overall. Once again, move to the next debt item with the highest rate.
A third option is to eliminate the oldest debt first.
Old debts have been hanging around for a long time. These debts have most likely taken an emotional toll. If you finished college 15 years ago and you’re still paying off your student loans, go ahead and pay those first. You’ll feel a tremendous sense of relief.
No matter the extent of your debt, it’s not hopeless. However, commitment and persistence are vital. Whatever method you choose, if you’re consistent, you will be successful.
14 Important Steps You Should Take To Free Yourself From Debt
Whether your current debt is large or small, the challenge of getting out from under bills and “I owe yous” can feel insurmountable.
Free yourself from the quicksand by doing the following.
1. Acknowledge that Houston, we do have a problem.
If you are in debt, you have a problem. The degree to which the problem is manageable depends on whether you are in planned, deliberate debt, such as student loans or the purchase of a specific type of vehicle for work; or in chaotic debt, such as the kind that results from taking too many pretty dates out for expensive drinks you can’t afford. You must accept that debt is a problem before you can fix it. So throw your hand in the air, state your name, affirm that you have a challenge before you, and commit to meeting that challenge and free yourself from debt.
2. Take stock of the situation.
Why are you in debt? What are you spending money on? How much money are you making? Has your debt increased, or are you having trouble climbing out from under hefty interest payments? Are your expenses driving you further into debt, or is it the costs associated with caring for a family member? Don’t worry about finding solutions just yet—first, identify the problem areas.
3. Step back from your emotions.
Spending habits are deeply personal, because they reflect our priorities. There are often added layers of shame, guilt, and regret when discussing debt. Recognise that none of those emotions will help you solve your current debt problem, and step away from them. Focus on the fact that you are taking control, you are asserting yourself, and you are disciplined and focused enough to make this happen, all of which are positive emotions.
4. Break out your pen.
Dedicate a notebook or binder to your “get out of debt” plan. Write down anything you identified as a problem area. Be sure to list all debts, who or what you owe money to, and your current payment schedule.
5. Stop flailing.
While you are evaluating your spending habits and developing a course of action to correct your debt, stop spending. It is much easier to evaluate how and why the boat is leaking without more water pouring in. When you make purchases again, you will be able to do so with deliberate intention.
6. Record all expenditures.
Create a section in your notebook, or an online spreadsheet, to evaluate all expenditures over the course of the last six months. Print credit card statements, online bank records, and dig those receipts out of your purse, car, and gym bag. You must gain an accurate picture of where your money is going, and if debt is a problem, you likely don’t have this picture as in focus as you would like.
7. Identify patterns.
Can you identify patterns in your spending? Do you, for instance, always break the bank when you visit certain stores, or the day you get your paycheck? Do you spend a great deal of money on certain activities?
8. Categorise spending, and prioritise
.Food, water, basic shelter, simple transportation, and functional clothing are needs. Everything else is a “want.” Break your spending into categories, starting with “needs” and “wants.” Cut out all unnecessary items, and realise this might mean your cable subscription, smart phone, high speed internet, and a slew of other high-tag luxuries modern man is accustomed to having at his fingertips.
9. Be willing to make big changes.
Is rent eating you alive, or are you spending high pound in gas each month to commute? You may have to move, locally or to another City, to lower your cost of living. You may have to drastically downsize. You may have to put that hobby on hold for a while. Commit to doing whatever it takes to get out of debt.
10. Seek expert help.
You are not the only person to stagger under debt, nor will you be the last. Talk to a financial planner at your bank, or attend a debt management class. There are numerous resources available.
11. Do your own research.
Anytime the subject is money, be sure to actively engage your brain, scrutinising all information you receive to confirm or reject its application to your financial situation. Get a library card, and spend some quality time there getting smart on financial management basics, as well as any unique considerations you may have. Bonus: libraries often offer basic financial management classes
12. Get creative in boosting income.
An extra pound earned is an extra pound to pay off that debt. No opportunity is too menial, too demanding, or too low-paying for your time; if you’re in debt, you literally cannot afford to pass up income opportunities. Take a formal second job, or babysit, walk dogs, shovel manure at a community barn, scrub dishes, freelance online—aggressively seek opportunities for additional income and seize them.
13. Pay the maximum monthly amount possible.
Does your lender have penalties for paying off your debt early? Pay the maximum monthly amount possible without penalty, on time, every month.
14. Stay the course.
It took you a while to accumulate debt, and it is going to take you a while to get out from under it. Remain patient, keep chipping away at it, and soon you will be debt free and relaxed.
10 Simple Things You Can Do To Earn More Money
There are many different, simple things you can do to earn more money. And who wouldn’t like a little extra money to add to their income this year? Just think of all the things you could buy with some extra side income.
Here are 10 simple tips that will put more cash in your pocket:
Earn money by cutting back
1. Cancel any memberships or subscriptions you don’t use. For example, do you subscribe to a magazine or a service like Netflix or Hulu? If you don’t use the subscription on a regular basis it might not be worth paying for anymore. The same goes for memberships. What about cable television? Cable is expensive and for most people it’s not even worth paying for, since there is so much media available through other methods online and through Hulu, Netflix, YouTube and torrent websites.
2. Take a look at your variable expenses, like phone bill, car insurance, groceries and gas.
Can you get cheaper car insurance or cut your phone bill in half? Eating out less and being smart with how much you spend on food and health items can help save money and put more money in your pocket.
3. Go through your belongings and sell things on Craigslist, eBay or Amazon.
You most likely have a couple of things laying around that you don’t use anymore or don’t really need anymore. Think of old electronics, clothing and other items that you can part with and list them online for sale. You could also look at recycling centers in your area that may allow you to recycle electronics like TVs, cameras and computers.
4. Sell unwanted things to a pawn store or to friends.
Pawn stores are a great option if you want to get rid of unwanted items and make some quick cash. Pawn stores sell a variety of items that people have sold to them, so there’s a good chance they might be interested in whatever you’re trying to sell. Also, post your items on social media for friends to see. Oftentimes a friend might like to purchase something you have for sale because they can get it at a discounted price and it’s something they want or need. This is especially true with items like baby clothing and other baby items, adult and children’s clothing, purses and electronics.
5. Host a clothing swap or yard sale at your house.
Charge an entrance fee for others to join and sell their belongings too. You can sell your unwanted belongings and make money on both the entrance fee and items that sell. A clothing swap or yard sale is a good way to get some friends and family involved to sell their unwanted items, then everyone can make a little extra money this way.
6. Write an e-book and sell it on Amazon and Smashwords.
Writing an e-book is easier than ever. All you have to do is write your book in Microsoft Word or any other similar word processing program, upload it to Amazon, use Amazon’s cover creator and then list it for sale through their Kindle Direct Publishing site. It’s also a very easy process to upload a book to Smashwords and sell e-books there. You can make anywhere from a couple of dollars a month to considerably more depending on how many copies you sell, what you choose to charge for the e-book and the royalty that is paid out to you. It’s an easy way to make some extra money continuously.
7. Write articles for websites like Lifehack.
There are several reputable article websites out there that pay per article you write. With a little time and effort you can make a little or a lot of extra money, depending on how many articles you want to write.
8. Sell your photos online. You’ve probably got tons of original photos you’ve taken on your phone, with a camera or another device throughout your life. There are several websites where you can sell your photography.
Here’s a list of photo websites where you can list photos for sale:
9. Make something and sell it on Etsy.
If you are crafty then Etsy is just the place for you. You can create one-of-a-kind products and sell them on Etsy. Make sure to advertise them on social media like Pinterest, which is great for specialty items, crafts, clothing and gifts.
10. Sell your plasma.
Do a search to find the closest location to you that will allow you to sell your plasma. Oftentimes you can earn up to £130 for the first four times you donate plasma. Make an appointment, go in to have it done and walk out with cash in hand. You can repeatedly donate so this is something you can do occasionally to make a little extra if needed. Plasma donors should check with their local donor facility to find out how often they can donate. Donating plasma is a little more involved than donating blood and requires a little more time.