Improving your personal finances may seem impossible and being in debt can be a stressful experience. No matter what your circumstance is, if you signed for a loan, you are obligated to pay it back. If you have a life altering experience like losing a job, getting into an accident, or even if you have increased expenses due to having a child you are still expected to pay.
Sometimes debt can just be an unintended consequence of too much holiday spending. It can also just be overspending any time of year and just not tracking your purchases. Many people try to get out of debt, but life slaps them in the face hard enough that they give up. But that doesn’t have to be the case. There are so many people who are getting out of debt every single day in a short period of time.
So if you’re ready to get on a path to financial freedom, it’s important to have a plan for how you’re going to tackle that debt!
Create a written budget:
Developing a budget that tracks your income and your expenses is crucial to getting out of debt in a short period of time. It will help you gauge where you are with your finances so that you can move forward toward your goal. It will expose whether you have money left over, which is called a surplus, or if you are in the negative, which is called a deficit. The goal is to increase your surplus and use that money to pay down your debt. Below are two ways that you can do this.
Stop the bleeding:
If you want to get out of debt fast, you have to stop using debt to fund your lifestyle. This means no more financing furniture, no more signing up for credit cards, no more test driving brand new cars that you don’t have the cash to pay for. This will help you focus solely on the debt that you currently do have so that you can develop a game plan to pay it off quickly.
Pay extra toward debt:
When we were getting out of debt, there were several times where extra money fell in our laps that we had not factored into our debt elimination originally. We decided to take this cash and use it to tackle our debt. Some good examples would be: tax refund, selling a car, an inheritance, winning a bet, etc. The more cash you can put towards your debt, the faster it will disappear.
Lower your expenses:
Go over each line item on your budget and ask yourself, ‘how can I make this number smaller?’ It may involve cancelling services that you rarely use like a gym membership, Netflix subscription, etc. It might even involve reducing the amount of times that you eat out at restaurants each month. The amount that you slash depends upon your commitment level to getting out of debt. The more committed you are, the easier it will be for you to give up some of the unnecessary amenities in life. You might not even need to sacrifice much if you can find these items or services for less.