Wouldn’t it be great if we could reduce or even eliminate our debt? Living debt-free is a statement. To get to the point where one is debt-free, it is possible but it requires a lot of focus, commitment, and sacrifice. Here are nine smart way on how to get out of debt:
1. Draw up a budget
One way on how to get out of debt is to look at your bank account and see exactly where your money is going. Draw up an expenses budget, listing what you’re currently paying on everything from utility bills to fast food. Then, identify where you would like to see those numbers come down. Are there expenses you can eliminate – cut them down. When you know how you’re spending your money, the responsibility is in your hands to make the changes you need to make.
2. Pay off small debts before larger
List your debts from small to large. Pay off your monthly minimum balances of course. Pay attention to the smallest debts, borrowing from payday loans if necessary to leverage your finances. As these pay off in full slowly, you eventually end up creating a snowball effect allowing you to put more money towards larger debts and loans. This will also give you the confidence of knowing you’re managing your finances and cutting down debt one-by-one.
3. Call your bank
If it’s credit card debt through your bank, call them and see if there’s a way to negotiate lower interest. If you have other debts, you can still call your bank to see if there’s a way to get a loan covering high-interest debts and/or gain any sort of flexibility with your budget. These calls are commonplace. If you have a history of paying bills on time and acting financially responsibly, you’d be amazed at what the bank may be willing to do to help you.
4. Unnecessary bills
There are things we all need – electricity, water, and gas fit this definition. Then, there are a few expenses we have that are somewhat optional, such as pet stuff, medications, smartphones, Internet, TV, and more. Then, there’s stuff we spend on like fast food that we don’t really need.
Unnecessary bills can be given up by some people. Switching companies, getting rid of cable television, buying groceries in bulk or on sale and with coupons, and limiting fast food options potentially could give you a lot more financial power to put towards paying down debt.
5. Strike up a side hustle
How to get out of debt is to control what’s going out and, if you can, increase what’s coming in. Earning more money with a side hustle is a smart way to increase your income. Take a talent or skill you can maybe monetize. This could be something like babysitting, cleaning houses, or becoming a virtual assistant. There are plenty of ways to make money and every dollar helps.
6. Pay above the minimum payment
Let’s say you have a monthly credit payment owing for $625. If you’re the average Canadian carrying over $15,000 worth of credit card balance, it’s going to take almost 14 years to pay it off at this rate – assuming you don’t add to the balance. Pay your debt down faster by contributing more than the minimum. Assuming you can do so, you will cut down on interest and help maneuver your way out of debt much quicker.
7. Sell what you don’t need
This isn’t much of a long-term solution but if you need to get rid of as much debt as possible in minimal time, sell what you don’t need. Get quick cash. Look at your belongings, what’s in storage, anything that isn’t bringing you joy, and anything that isn’t being used. If you have furniture, musical instruments, and/or home theater or entertainment items you can spare, throw a garage sale, give them to a consignment shop or sell them to a pawn shop, or go through classifieds like Facebook.
8. Get a part-time job
If you have any seasonal, temporary, casual, or work-from-home employment opportunities available, you may want to jump on board with one of these flexible positions. If you have the time, that’s extra cash you can put towards your debt. It might seem like too much – and it very well could be – but if you can manage it, just tell yourself that it’s only for a short time. Extra employment for a month or two can go a long way in paying down enough to get your debt payment under control.
9. Break your addiction
We all have our temptations. These are things we spend more on than we care to admit. Addictions like these can be online shopping, buying video games or movies or music, a daily Starbucks, going out to lunch every work day, going to your favourite local restaurant, or doing fast food. Whatever’s got your eye, really give some thought to eliminating it. Some people unknowingly spend $100s a month on these things. To pay down old debts, avoid new debts.