If you’ve recently found yourself buried in debt, you’re probably hoping to shut your eyes and make it all disappear. And, yes, while that would be nice, a better first step is taking time to understand how you got there. And then, more importantly, coming up with an action plan for getting out.
Most people can dig their way out of debt by taking a closer look at their spending, creating a budget, and checking to see cheap loans services that can help them get out of debt.
If you’re having trouble making payments, or worried that you won’t be able to pay off your debt, it’s time to take a look at your options. This article from luminablog.co.uk will show you five things you can do when you’re in debt.
Get on A Budget
Budgeting is one of the most important steps you can take when you’re drowning in debt. A budget is the very thing that will show you where your money is going and why you feel like you’re drowning. But you don’t have to feel that way any longer—and a budget will help!
When you’re making your zero-based budget, you might be tempted to account for all of your extra expenses first.
But first, you need to make sure your basic needs are met, including food, utilities, shelter, and transportation.
Now, after you’ve budgeted for groceries, water, electricity, your rent or mortgage, and gas to get you to work, you can start assigning any leftover dollars to other pressing needs.
Decide Which Debts to Pay Off First
Paying off credit card debt first is often the best strategy because credit cards have higher interest rates than other debts.Of all your credit cards, the one with the highest interest rate usually gets priority on repayment because it’s costing the most money.
Use your debt list to prioritize and rank your debts in the order you want to pay them off. You can also choose to pay off the debt with the lowest balance first. This might cost a little more in the long run, but knocking off small debts first can build confidence.
Pause All Investing
Saving for your future when you’re living paycheck to paycheck isn’t the best idea. At least not yet. If you’re still trying to pay off credit cards, an upside-down car loan, or a huge pile of student loan debt, it’s time to press pause on your future investments temporarily. This temporary pause frees up extra cash you can use to pay down your debt.
Don’t worry, you’ll come back to this once you are debt-free.
Don’t Take on Any New Debt
We know it’s hard, but taking on debt robs you and your family of a secure financial future. Your choices right now can and will impact future generations of your family tree.
Get out your favorite scissors and do some plastic surgery. The best part? No medical experience required.
You may feel your heart start to race and your hands begin to sweat. But let us remind you: Having a credit card for emergencies seems like a good idea until your next “emergency” looks like your next afternoon coffee run. When you cut up those cards, you’re choosing to put an end to the merciless cycle of debt for good.
Increase Your Income
Now that you’re on a budget and you’ve decided to stop taking on any new debt altogether, it’s time to figure out how you can increase your income. Take a second job or pursue a side hustle that will give you the extra income you need to throw at your debt. Whether that’s working at your local coffee shop, mowing lawns, or driving for a ride-hailing service like Uber or Lyft, you’ve got to bring in more cash.