Life is full of ups and downs. Sometimes we make bad decisions or are just unlucky and end up getting into debt. There's no need to panic! Personal finance is all about making smart decisions for your money, and you can get out of debt if you have a plan.
There are several great ways to pay down those liabilities. Below you’ll find seven methods that may be helpful for you.
1 - Debt / Money Management
The first step to getting out of debt is managing your money effectively. Before you do anything else, figure out where all your income goes each month and use that information to create a budget.
Make sure to include taxes!
If you're not sure what dollar amount goes towards variable expenses like groceries or gas, here's an easy trick: break down spending by (gas, food, entertainment) along with the amount spent on each.
Credit card companies make so much money because they often encourage their clients to use their cards as often as possible, as well as other family members. In most cases this is fine, but if it gets out of hand and you start maxing them out every month then you may have trouble paying everything off.
If this happens, get in touch with the credit card owner as soon as possible so you can discuss making a payment plan or eventually pay it off completely.
You should also set up an emergency fund! It's very hard to get out of debt if your car breaks down and you have no money for repairs.
Lastly, set up an automatic savings account. Your bank should have this option, so make deposits each month until you're able to cover most expenses in a worst-case scenario (i.e., emergency room visit).
2 - Credit Repair
Yes, "credit repair" first! One of the easiest ways to get out of debt is by using credit cards properly and not paying interest on them if possible. It's free money if you can swing it! In fact, if available, open at least one credit card right now if you don't already have one - preferably with 0% annual fee as well as 0% APR for 12 months. You'll be able to make big purchases and pay little or no interest on them if you use this card correctly.
This will also help you build your creditworthiness and increase your credit score. But don’t worry if you have a low score and can’t qualify for a credit card. If you’re still in need of a short-term loan, consider applying for an online quick loan from a direct lender like iCASH.
3 - Develop Good Habits
If you're like most people, you've been making bad money decisions since the day you started earning your own income! It's not too late to change that though.
Make a list of all the financial goals that are important to you in life. You’ve already bought your first house but what about getting married or building an emergency fund? Next, create a plan for achieving each goal.
Set milestones along the way and break down large goals into smaller tasks that can be achieved easily with baby steps over time. Make sure to write out your plan so it will hold you accountable! If possible, share your plan with a friend or family member so they can help you stay on track.
4 - Use Coupons and Shop Online
There's nothing wrong with using coupons when buying products that you normally buy anyway. Set aside some time every week to look for deals online or in local newspapers and use them to save money!
Be aware of any rebate requirements (i.e. mail-in forms, etc.). Consider using apps like Flickr as well as paying attention to your mailbox for paper flyers.
Shopping online can be very lucrative if you're organized enough to know what's a good deal and what's just a "sale." You can potentially save hundreds of dollars each month simply by shopping through specialty websites for discounted gift cards or those re-selling their own unwanted items.
5 - Understand Your Debt
Debt can have many meanings. It could be something as small as a debt to society or, more commonly, referring to money borrowed by individuals (from credit cards to student loans), governments (such as national debt), businesses and other organizations from banks or financial institutions.
Liabilities can seem like an unending cycle of payments when it feels like there is never enough extra income each month to pay the balances down but there are ways you can understand your debt and find ways out of the cycle.
You may want to make a list of all your debts by interest rate and then pick the one with the highest interest first. Many websites offer calculators which allow you to input your debt amount and interest rate. This can help you put together a plan of attack.
One option is working with a reputable credit counselor who will review your situation and work with you on a detailed payment plan that makes sense for you. They are only paid if they successfully help set up your program, so they have no incentive in sending people into endless debt.
6 - Plan for Worst-Case Scenarios
Setting up an emergency fund is key. It's difficult if not impossible to get out of debt if injuries or serious illnesses force you into medical bankruptcy. Making sure you have that rainy-day amount sitting in an account “just in case” is so important when you are planning your way out of debt.
If the unexpected does happen and those back-up funds just aren’t enough, know that help is available! There are many resources online specifically designed for people who have already experienced financial hardship, like direct lenders who offer emergency loans for those in immediate need.
7 - Investing
Investing in stocks can be complicated and difficult to understand, but it is one way to potentially make more money than your friends who put their spare change away each month. This may not be the best option unless you're willing to spend a lot of time learning about investing.
If you do decide to dive into the world of investments, then know that you will probably lose some money on your first few ventures! Make sure you have at least $1,000 before starting out in case you need to buy additional materials or pay for a mentor.
Getting out of Debt is About Saving Too
Last but not least, let's talk about some ways to save money on the daily without having to cut back too much or deal with any debt.
Buying free range eggs instead of the "value pack" at the grocery store saves $0.50/doz and there are numerous other cost-saving tips like this one sprinkled throughout our iCASH Budgeting 101 pages.
At iCASH, not only do we offer great budgeting and financing advice, but we believe you should have access to fast cash when you need it. We make getting an e-transfer loan easy by offering quick application process, no hidden fees or fine print, and approval even if you have bad credit. Our application process is completely free because we know the last thing Canadians need is another monthly bill.
If you take anything away from these tips then know that getting out of debt doesn't mean living off ramen noodles forever! There are many inexpensive hobbies, projects, and activities which can be used as cheap date ideas by two people who want to spend some quality time together or someone looking for activities on the weekend or after work.
Those who are determined enough can get out of debt and go on to become millionaires! It's all about using the resources available to you, without sacrificing your health or sanity in the process. Once you're able to pay off all your debts then set a new goal for yourself: This time, try living below your means or saving up for something really cool like a down payment!