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Debt isn’t always a force for evil. It can be used responsibly and sensibly to help you make investments that help you get ahead in life. Home loans, car loans, and business loans are examples of very helpful debt.
But if you’re getting caught in the kind of debt that’s anything but helpful, you might want to get rid of it entirely, start with a relatively clean slate and give your finances some breathing room. So, how do you go about it?
One of the biggest issues facing most people’s finances is that they’re not taking the time to put money aside. Even when you’re not working a great job, you can find even a little bit every paycheck to contribute towards the repayments of your debt above the minimum. Find opportunities to make more money, such as a side hustle, as well as ways to save by taking a closer look at your budget. Ignoring the problem won’t make it go away, it will only grow bigger and uglier.
If your debts and your minimum payments are too large to accommodate in your budget, it’s time to rethink them. Negotiating with the creditor is a good first step but some, like payday loan providers, aren’t as open to negotiation. In cases where you can’t find any wiggle room, ask “how do I consolidate my payday loans?” Consolidation can help you freeze or lower interest rates, as well as restructuring the debt so you have more time to pay it off in more manageable installments.
Rather than paying all your debts off evenly, it’s a good idea to weigh your repayments more in favor of one at a time. There are two common methods to approach this. The first is the snowball method, where you pay off the smallest debt first to give yourself some momentum and work your way up. The other and the one that is most cost-effective in the end, is paying off the debt with the highest interest first. It might take a longer time, but in total, it means paying less money to get out of debt entirely.
This is essential. If you want to get out of debt entirely, you have to wean yourself off credit cards and avoid applying for any loans that aren’t for consolidation. Credit cards have become such a convenient tool that it’s easy to simply forget about how often we rely on them. It’s not recommended you cut up a credit card before closing that account, but simply refusing to take it with you when you go shopping or go out can help you avoid the impulse to use it as frivolously as you might have in the past.
You need a plan that takes a closer look at your finances, what steps you can take to make repayments easier, and addresses impulses that can get you deeper in debt. The tips above should help you put it all together.