Most people these days are in debt. This is either in form of mortgage, medical debt, student loans, credit card debt or any other. When one is in debt it can be hard to save for retirement, meet up with friends, raise a family and even start life. However, you should not let your debt to define you. Instead you need to come up with a strategy to help you get out of debt. Below are tricks to use to be debt free.
You need to confront your debt. It can be scary to think of the debt you are in. However, ignoring the problem does not mean that it will go away but will instead make things worse. You need to tally all of your debt. This will help you to know the whole amount of debt you are in. Do a calculation of your income with debt. It is advisable to calculate your debt to income ratio. You will get a good picture of the debt you are in. Having an idea of the extent of the problem will make it easy to come up with a solution.
You should create a budget. State down your expenses every month like utilities, food, car payment, phone bills and mortgage or rent. It is advisable to use 50% of the budget for vital expenses like housing, 30% for wants and 20% for savings and debt repayment. Have a limit of the amount you use each month for fun and stick to it.
You should avoid habits that are expensive. This will help you get some cash from your budget. You can choose to run in your neighborhood instead of signing up for gym membership you your to clear your student loan debt.
It is vital you pay more than the minimum. By losing your expensive hobbies, it will be easy to pay more them the minimum. Use the same approach on debts as you do on bills. It is wise to pay off your debt before you pay for anything else. When you have extra cash, you need to direct it towards your debt instead of shopping and drinks.
Take into consideration the snowball method. This means taking note of your debts from the smallest to the largest. Pay for the smallest amounts with excess money and make minimum payment on bigger loans. With time the debts will disappear.
For those who don’t like budgeting, the envelope system is a good idea. Debit cards are ideal because you will just swipe the card and not see money getting off your hand. You need to write the expenses on each envelope and put the cash. You need to have aside funds for emergency. You may be tempted to cut on emergency savings if you are in debt. It is important to have at least $1,000 for emergencies because they can happen anytime.