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CMT Team

Strategies to help you get out of debt

Debt is an ugly thing. For some, being buried in it means no escape, and for some, it is the greatest source of grief. However, with the right mindset and devotion, you can climb out of the hole you’ve put yourself in.

Now, are you ready to get started and start paying off your debts? Here are a few strategies that can help you do just that.

Stop the bleeding

First, you need to stop what’s causing you to sink deeper into the murky depths of debt. That means putting a stop taking out more loans.

Next, take the time to go over how much you owe creditors, and how much income you have, as well as expenditures like groceries, petrol, and utilities.

Then you need to make some adjustments to your spending, like cutting back on takeaways and managing your grocery shopping better. It can free up some of your cash flow and can go a long way into paying back your debt.

Another way to go about it is to give yourself a cash budget so you can gauge yourself better regarding spending for the week.

Finding out where you stand, money-wise, and making the necessary lifestyle adjustments is the first step to getting your life back on track.

Picture a debt-free life

While your life changes are in full effect, it can be hard to stay focused. Managing your debt is a lot like going on a diet. But picturing yourself in your best swimsuit by the beach is one of the most surefire ways to help you stay motivated when you feel tempted by that chocolate cake in the fridge.

The same can be said about debt. When you feel tempted to spend more money than you know you should, picture what you can do freely once you pay off your last debt. A happy life with your family, no more worries about bills and being able to afford most things that you want.

It’s a great picture to have in your head, and just thinking about the feeling of being debt free should be enough to keep you going.

Do a full-budget checkup

Earlier, we mentioned lifestyle changes. Doing it for a week or two is no good. Consistency is the key. You have to keep a close eye on every cent that goes in and out of your account.

Divide your income by following the 50-20-30 rule. Use 50 per cent for fixed expenses like insurance and rent, 20 per cent for your savings, and 30 per cent for your hobbies and other recreational activities.

Next, decide what you can live without next. Of course, you can’t sacrifice the 50 per cent because you need to pay for your house, and the savings need to be there in case you will need that money in the future. That means it is time to sacrifice some of your hobbies while you are doing a rebuild.

But don’t worry, it’s only for a short time. You can find other free ways of enjoying yourself, or you can discover alternatives that are less demanding on your wallet.

Use the money you freed up to put a dent on your debt and lower it as much as you can.

Going down the debt ladder

After a few months of being able to pay off your debt, with focus on the ones with the highest interest rates, you have probably made a significant dent, or you’re maybe even halfway done.

Now’s the time to bring out the big guns; put in more money each month for each debt so you can lower and pay them off a lot faster.

Repayment snowball

A surefire strategy is the snowball method. Here, instead of putting your focus on debts with the highest interest rates, you focus on the lowest amount and go from there.

The snowball method is ideal for people who want to see their efforts bear fruits. Paying off the lowest ones first will allow you to build momentum and will have you looking forward to getting the others out of the way faster.

Ask for help

Being under a massive amount of debt coupled with unemployment or being underpaid is a lot like being stuck between a rock and a hard place. Luckily, there are folks out there that are willing to help.

If you find yourself in times of trouble, don’t be afraid to ask for help. Talk to your creditors and explain your current situation with them.

More often than not, they will be willing to offer you different options on how you can pay off your debt. Do this as soon as you recognise the trouble ahead, and not after everything is starting to go down.

Credit counselling

As a last resort, you can try credit counselling. There are nonprofit credit counselling agencies that may give you the answer you need.

These counsellors can help you go over your debts and help you identify a repayment option tailored to your income.

Don’t throw in the towel just yet. You can still save yourself from the crippling anxiety that can only be brought on by debt. Another great way to help rebuild your credit is to find a bad credit car finance  service in your area. That way, you can get a car to drive yourself to work, while making payments for your vehicle on time will help rebuild your credit little by little.