How To Get Out of Debt

By on July 8, 2020
Debt

Debt affects countless Americans, especially those over fifty, and can be incurred over a lifetime of spending and living. Some of the leading causes of debt include medical bills, student debt, and credit card debt, but there are also self-inflicted causes as well, such as a lack of budgeting and overspending. 

Knowing that you are behind in payments can be the cause of sleepless nights. Hearing the knock at your door can bring on anxiety attacks, and imagine if they knocked on the wrong door? It raises the question, can bailiffs enter my home for someone else’s debt?

Debt is easy to fall into, but it’s really hard to get out of, especially in the United States, as nationwide the national consumer debt has reached over $14 trillion. The average debt per age group does alter, with baby boomers being one of the least affected, but they still have a sizable amount to pay back. 

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Thankfully, there are tips and practices anyone can implement to help them out of this financial hole. Here are some of the best and most effective methods to start balancing your books again and unhook the heavy shackles of debt. Do note that not all of these will fit everyone’s debt issues. There is no universal solution to decreasing debt, but these tips will help get you started, and the more you apply at once, the quicker the debt will fall.

Pay More Than Your Minimum

When making payments for your credit cards or overdraft repayments, try to pay more than the monthly minimum, as this will help you get through the debt quicker. By only paying the minimum required each month, it would take a lifetime to pay off your balance, meaning that the debt will linger around for longer. 

Going over the minimum can really help, even if it’s just an extra $50 a month. It’s important to make sure that you don’t overpay and only pay up to what you know you can afford. The best way to figure this out is to spend time budgeting your income and expenses so that you’re aware of how much disposable income you can put aside for these repayments. You can also use tools such as an online financial calculator to help determine your budget. 

Spend Less By Using Cash

For those wanting to stop their debt from getting bigger, and especially those looking for debt relief and help with a debt lawsuit, this tip can be a greatly beneficial one. It may sound simple, but it’s true: the best way to lower your debt is to stop spending as much so that your debt doesn’t keep rising. Most people get themselves into debt by buying what they want when they want instead of what they need when they need it. By living within your means, it helps minimize things from going out of control. 

Paying with credit is usually the main reason why people spend more than they have to. Studies have found that people spend more than 50% in McDonald’s restaurants when using credit compared to those using cash, and other studies suggest that people spend double the amount at vending machines, for event tickets, and even meals out when paying by credit. Overall, it’s thought that people spend 15% more when using credit than cash in general. This 15% can be better used in repaying your debt, so for the meantime, while you’re paying off your debt, leave the credit cards at home and try switch to using cash, and you may find that you’re more clever with your money.

Pay Off The Most Expensive Debt First

Strategizing the manner in which you plan to pay off your debt can help reduce the debt faster. One main technique is to pay off your most expensive debt first. You can do this by paying the minimum on all your repayments, apart from your most costly one. By focusing all your extra payments on the debt that is charging the most interest, you’ll be able to pay that one off faster, making things a lot easier to manage in the future. 

Once that one is paid off, turn your attention to the next most expensive, and use the money you were using for the first debt to tackle this one. By continuing this method, you’ll be left with your least expensive debt to pay off last and is one of the most effective ways to get out of debt. It’s also a good method due to how it can encourage you can see your progress and feel the benefits as each debt is paid off. There is also a slight alternative to the method that a lot of people find even better, known as the snowball method. Still, it’s important to investigate it thoroughly to figure out of it’s the right plan for your situation.

Save On Everyday Expenses

A good way to save money that can then be used to pay off debt faster is to alter your shopping habits and look for deals when doing the grocery shopping. Some ways to reduce the amount you’re spending weekly includes shopping the sales and even stockpiling on commonly used items when they’re on offer so that you can use these for your meals instead of getting new things in regularly.

By combining these two methods: shopping the sales and shopping less frequently by using stockpiled goods, it’s thought you can be saving 25% on your annual grocery bill, which is a staggering saving that can be beneficial for paying off debts and bills. By doing this, households can save up to $2,900 a year. 

Other good ways to reduce your shopping bills include buying cheaper, alternative products to the name brands. You could even try your hand at couponing, which can be an effective way to drastically reduce your shopping bill if done correctly, with one woman from the UK getting her entire family’s Christmas meal and presents for only £20.

Track Your Spending 

By making an effort to keep an eye on what you’re actually spending and what on, many can be surprised with the areas they can change and save money in the future. By tracking what you actually spend, and not just what you think you’re spending, households can identify where their money is going, and then use this information to make informed changes to their habits and practices. 

This only works if you’re honest with yourself, though, and will prove to be a waste of time if you’re not tracking effectively and properly. The money you find from this exercise can then be used to pay off debts, which helps reduce them quicker.

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How To Get Out of Debt