What do you think about when you think about paying off debt? Just paying off some credit cards? Getting out of debt involves more than just doing that. You have to change your spending habits; learn how to budget; knowing exactly how much you owe; and finding help to get back on track if you fall off your budget.
Simply put, there are a lot of decisions that need to be made when you decide to get out of debt. Sure, you’ll make some mistakes along the way, but here are 5 problems you can avoid that will make it easier to get out of debt.
1. Problem: Same Bad Spending Habits
People are creatures of habits; especially when it comes to spending money. We get in the habit of shopping at the same stores, eating in the same restaurants and splurge consistently because it’s comfortable. It may feel good, but it’s also costing you more than you can handle financially.
Solution: Changing a bad habit takes a conscious effort. If you won’t change your spending habits, you won’t ever get out of debt. Sit down and write down what your daily habits are, starting with in the morning. Skip Starbucks and have your coffee and breakfast at home. You’d be surprised how much you will be saving!
My daughter and I would spend $9.45 on two coffees-yes, I was in denial for a long time.
Brown bag your lunch and for dinner time, make it a dinner (home cooked) and a movie (on tv). You will be amazed at the immediate impact on your daily spending habits. You don’t have to do without. You just have to make better choices with what you do.
2. Problem: Trying to Get out of Debt Alone-August Funding
People are reluctant to ask for help dealing with debt.
Solution: Call a credit counseling agency and get help from experts. Credit counselors are trained to give debt-relief solutions like:
- debt management program
- credit consolidation
- debt settlement
The credit counselors advise you on creating budgets and recommend solutions that you can choose to use or not.
3. Problem: Not Creating a Practical Budget
Budgets are hard at first, then as you figure out the right balance, it’s a breeze! If you want to pay down debt, you have to have a budget.
Solution: Develop a budget that focuses on needs vs. wants. Budget financial needs like housing, food, insurance and healthcare, but include room to make payments on debt. Only pay with cash! Reduce (or eliminating) wants such as dining out, entertainment, and shopping sprees.
4. Problem: Trying to Pay Off Multiple Debts at Once
When you have multiple sources of debt – credit cards, car loans, student loans, etc. – you might try to tackle all of them at once.
Solution: Using your budget plan, only spend for essentials, and create a savings that goes directly at the credit card with the highest interest rate. I suggest at least $100, but $1000 is way better. When that’s paid off, go to the next card with the next highest interest rate, etc., and keep going until all credit card debt is history.
Then, give yourself a high-five!
5. Problem: Not Prioritizing Your Debt
Everyone wants to get out of debt. Some people just can’t get focused on doing it. It’s not a priority for them.
Solution: The best solution could be to consolidate your debts and make just one payment every month. Another way to get on board would be to get a small piece of paper and write down five debts you want to get rid of and tape it to your credit card. Every time you reach for that card, you’ll be reminded that you’re adding, not subtracting to your debt.
Bonus Tip: How to Pay Off Debt Faster
Another option is to find ways to pay debt faster and even allow yourself a special treat like eat out once a month.
Here are some ideas that will make the process go faster.
- Start a side hustle. When suggesting to people in debt to take on a second source of income, most people respond: “I don’t have time!” Think about all the time you spent spending money-take that time and use it wisely. There are so many ways to make money on the side. You don’t have to work for someone else. Think about what your talent are and how you can make money from them. Starting a blog is one the most popular side hustles out there!
Here are 5 Job Ideas For Animal Lovers.
- Pay all bills on time. Avoid late fees at all cost. Your balance won’t move much if you are stacking up late fees.
- Sell Your Stuff. Hold a garage sale and sell major items that you don’t need/use. Think, old tvs, computers, furniture, etc.
- Tax Refund. Don’t use that refund for a vacation. Spend it on reducing debt instead.
- Ask for a rate reduction. Why not ask your creditor for a reduction? If you have been a consistent, on-time payer, your card company will want to retain your business.