Many people would be thrilled if they could pay off all their debts, completely getting rid of them. However, many people also do not know how to go about doing this. There is not one specific thing that works all across the board. However, here we are offering you seven things that you should know about debt.
Do not spend money to get everything you want
For the vast majority of humankind, our wishes are greater than what we can afford. While we can have nearly everything that we want, we often cannot afford it. Many people get themselves into debt and then stay there simply because they have a tendency to buy whatever it is that they desire whenever it is that they desire it. However, even the extremely wealthy person cannot afford to buy whatever he/she wants all of the time.
Ask yourself if you can live a contented life without something before you buy it. If the answer is yes, then do not waste your money on it. Buy it if you can afford it, but not otherwise. Save money to pay off your debts. If you take the time to do this, you will make yourself comfortable without certain things and will also pay your debts off quicker.
One great way of keeping your spending in check is to use cash to make your payments as opposed to using credit cards. People tend to spend less when they are paying with cash as compared to paying with credit cards.
Studies show that this number can be substantial, ranging from 15%-100% depending on what they credit is being used for. Studies also suggest that the average Canadian household could end up saving over $3000 annually if Canadians stopped making purchases with credit.
Start with your most expensive debts
A clever tactic to get out of debt is by making the minimum payments possible on all your credit cards and debts starting from the highest rate of interest. Target your largest debt first, harnessing your finances to pay it off first.
Consider using one car for your entire household
If your household uses a couple of cars, you may consider getting rid of one, carpooling, taking transit, cycling, or walking to work instead. This will save you thousands of dollars every year, freeing up money that you can use on clearing your debts. Do not get rid of your car straight away. Experiment first to see if you can really do without it.
Save money on groceries
Groceries are a continuous expense that takes a lot out of your available stockpile of cash. If you want to pay your debt off faster, stock up on groceries during periods of sales. Stocking up during sales and then skipping a grocery shop every month can save you around 25% of your grocery bill every year.
Get a second job
If you get a second job, you can pay off your debt much faster. If you do not want a second job, simply work extra shifts instead. This is commonly used to go after debts aggressively. However, it is not for everyone.
Make greater payments than the minimum required
Always make more than the minimum payments required on your line of credit, overdraft, and credit cards. Making minimum payments every month will take you a lot of time to pay off the entire balance. To pay off the balance faster, pay extra to whatever extent you can afford.
Consolidation Loans
A consolidation loan allows all your debts to merge into one loan, requiring one payment, at interest rates that are lower. Getting a consolidation loan can prove to be a useful first step towards paying off your debt. You do want to make sure, however, that you make a budget, which allows you save a little money every month and protects you from building new debts while in the process of paying off your consolidation loan.
Savings may not be the most obvious thing for a person in debt to think of, but you need savings to prevent you from using your credit cards and building more debt. This could land you in a worse situation than before.