World Executives Digest | 5 Habits and Tips to Help You Get Out of Debt | Being in debt feels like standing on a sinking ship, with no one there to save you. As stressful and scary as being in debt can be, there are ways you can push yourself in the green. It’ll take discipline, tenacity, and a few resources, but it’s absolutely doable.
If you’re ready to take control of your finances, read on for five habits and tips you can use to get out of debt!
#1 Get Organized
Evaluating exactly (down to the decimal point) how much debt you’re in is an intimidating endeavor. Yet, it’s the first step you need to take to dig yourself out of it. Identifying the total dollar amount of your debt, who you owe the money to, and your payment structure will allow you to prioritize paying off certain debts first.
Typically, this means you’ll focus your efforts on bringing down the highest interest debts (like credit card debt), and then tackling the lower interest debts after.
#2 Revamp Your Budget
If you don’t already have a budget, then it’s time to make one and follow it strictly. If you do have a budget, it needs to be redesigned to tackle your debt.
Take a look at how you can optimize your budget to help you get out of any debt:
- Cut Down on Discretionary Spending – Cutting out unnecessary expenses like shopping or ordering food is necessary to free up some money that you can use to pay off debt.
- Reallocate Your Savings – Saving is an incredibly important aspect of any good financial strategy, but when you’re trying to pay off debt, it can be smart to temporarily scale back your savings. Debt is generally more time-sensitive than savings, so paying off debt now can help you get back to saving more in the future.
- Reduce Recurring Expenses – Recurring expenses like subscription services can quickly add up since you don’t usually think about the money coming out of your account. Cutting out even just a few of your recurring expenses can save you significant money over time.
#3 Start Hustling
Getting out of debt requires more money, so sometimes a simple solution is to generate supplemental income. We know this is easier said than done, but with some determination and creativity, there are plenty of ways you can increase your cash flow. Consider taking up a side hustle (or two), selling some of your possessions online, or asking for more shifts at work.
#4 Evaluate Your Options
Although the quickest way out of any debt is just to pay it off, that isn’t always possible for everyone. If your debt is causing you financial hardship, you may have some options available depending on what kind of debt you’re in.
If you’re struggling with tax debt, see if you qualify for the following options:
- Uncollectable status
- Fresh Start Initiative
- Offer in compromise
- Installment plans
If you’re struggling to pay your mortgage, consider looking into:
- Selling your home
- Loan modification
#5 Prioritize from The Data Gained in Tip #1
Understanding which debts need to be paid off first and making them a priority is a lifelong habit that will help you deal with debt effectively. As a general rule, focus on paying off debt with the highest interest rates first.
This will help you avoid incurring even more debt than you already have. This means making the minimum payments on your least threatening debts, and allocating as many resources as you can towards the debts that are accumulating heavy amounts of interest.
Quick Tip: Sometimes, you can rollover your credit card balance to another lender (with zero-interest for 12 months), which gives you some breathing room as you tackle the payments.
Take a Deep Breath
We know tackling debt isn’t easy, but you should be proud of yourself for taking steps to get back on track. As you start this process, don’t forget to take a few deep breaths. Don’t be too hard on yourself, either. Debt is an issue that millions of Americans have to deal with, and one day you’re going to be able to close the door on this chapter forever.