1. It’s about time to set the budget
To start, let’s be very clear with the fact that being on a budget doesn’t mean you have to go frugal. Budgeting is much more than just cutting significantly on all of your expenses.
Budgeting is a process of being reasonable with your financial resources and developing a far-sightedness in order to use them in the most optimal way possible. So that you can fully enjoy the present, break through the constant burden of debt, and have a sense of security for your future.
Budgeting is as simple as creating a plan on how to spend and save your money. It’s no rocket science!
Now, in our case, you’d have to prepare a budget that’s focused on spending wisely and in a way that you can save some portion of the money to tackle off your debt. The key is to create a budget in such a way that it helps you keep a track of every dollar.
If you have accumulated a lot of debt then a strict budget would be needed to curb the spending habits. Don’t panic. A strict budget should be created in a way that it still has room for you to spend money on the basics and the necessities.
2. Get rid of the monthly fixed costs
Do you have a car on loan? Is your home rent too high?
See, these are basic things which we all opt for without thinking much. But, if you analyze the cost of each one of these luxuries individually, you’ll realize how big of an obstacle they can be in your path to reducing your debt on an annual basis. On a month-to-month basis, the cost doesn’t seem much. But if you add the cost up on a yearly basis, it balls up into big figures.
These fixed costs drain almost all of your liquid money and burn a deep hole in your cashflows without you even realizing it.
So, take some time out.
Analyze all the fixed costs you are paying. And find out a way on how you can bring them down. So, that you can save up some extra cash to pay off the nasty debt burden.
3. Bid adieu to your credit cards
Wait, you can’t imagine a life without them?
But, have you taken into account the ‘additional credit card debt’ you’ve been accumulating lately?
Credit cards are indeed a very useful tool but they can get really expensive.
It’s really easy to fall into the trap of overspending when you have a card to pay for anything and everything.
The burden of interest plus an annual fee can get exasperation when you are already under the crumbles of lofty debt. Also, credit can work against your initial plan of tracking every dollar because of the psychological factor which doesn’t let you feel you are spending a lot of money if you are not paying in cash. It’s easier to append plastic money than paper currency.
4. Get some more money in
As obvious as it sounds, the easiest way to pay off your debt is by making more money. If you work on an hourly basis, then adjusting a few more hours of work during the week can do the magic. Or, you can also go for other options like a side hustle, freelancing, opt for one-time paying gigs, renting stuff you don’t need, renting the extra room in your home, or renting your car, etc.
But, making more money shouldn’t come at the cost of compromised physical and mental health. If you are not willing or feeling working hours then don’t. You can always opt for options that are not very demanding. You can do some research and find out an option that suits you the best.
5. Develop Effective Spending Habits To Curb Expenses And Increased Savings
It’s daily habits that set the tone of our life. Same way, it’s our regular spending habits that have an impact on our finances. So, it becomes very important to develop habits that help you take control of your finances and pay off debt.
Here’s a set of habits that you’d need to adapt to take pay off your debt as soon as possible:
- Get a Debt Repayment Application: When you are in the process of paying off your debt, you should constantly keep a track of the debt balance as well as the balance in your savings account. To align both the balances as per your repayment strategy from time to time.
- Remove your credit/debit or any other cashless payment methods from online shopping stores: As simple as that, this easy technique will create friction every time you go on to buy something. When you have to enter payment details manually rather than automatically it makes you more conscious of your purchases and the amount of money you are spending every month on every purchase.
- Reward yourself. Debt repayment is not a punishment: I understand while repaying debt you have to cut off on many things like some new clothes, a fancy dinner, or just a cup of coffee at Starbucks. But, the good news it. With the right planning, you can manage your finances in a way that you treat yourself with whatever you want every once in a while. You can even go ahead and set milestones and every time you hit one, you go for a little treat. Just make sure that ‘your splurge’ is within your budget and you are not overdoing it.
These are all the tips; I have for you today. I vouch for these very confidently. I am sure if you adopt even a few of these to manage your finances better, your debt repayment journey will take off at a much faster rate.
The main thing is to first track all of your balances including the balance of your debt as well as your savings. Then layout a plan to form your debt repayment strategy. Remember to make this strategy time-bound and decided on small milestones. Use the hacks we’ve discussed above to plan it effectively. For more insight on managing your finances, stay tuned to our blog. You can also get in touch with us with your finance-related queries. We’ll be very happy to help!