Swimming in debt could be the worst problem that anyone will experience in life. Sometimes, the drowning debt may turn into nightmare especially when one cannot be able to find ways to pay them off.
If you’re on this kind of situation right now, bear in mind that you are not alone. Even the governments have their share in global debt due to COVID-19 pandemic. There are developing countries which are in the brick of financial crisis because the pandemic forced their economies to slowdown.
While it may be difficult, freeing yourself from distress due to debt is possible. You will just have to manage debt more efficiently. Online articles and some mobile applications may offer you ways to manage and reduce your debt, but first things first and consider these practical steps to discipline yourself and eventually can help you become debt-free:
1. Change your habits and cut-off your expenses. Track your expenses for a day, a week or a month and find which of those can be elided without sacrificing your lifestyle too much. For instance, if you buy food in restaurants or order in food deliveries at least four or five times a week, why not cook at home at bring it to your work instead? That will save you a good money. Creating “Expenses and Income diary” could be helpful in monitoring if you’re spending beyond your weekly or monthly budget. If you’re an impulsive buyer, take off that hat now.
2. Create an inventory of your debt. If you make a list of what to buy, you also need to list your outstanding debts and any obligations you may have. Do not fret if you realized the overwhelming total sum because your focus must be on how to reduce the number. Include in your list how much the interest rate per loan or debt you have. Highlight the debts with highest interest rates and prioritize paying those. Addressing the debts with sky-high interest rates will save you money.
3. Halt borrowing to pay off debt. Prepending another problem to solve a problem is not only impractical but also suicidal. It is a vicious cycle, and you will never escape debt this way. Refraining from using your credit card to pay your bills can also save you from more debt.
4. Avoid the temptations of using a credit card. This is not to dissuade everyone to utilize credit card but only to those who necessitate to cease from spending until their finances are under control. Holding a credit card is too tempting and if use irresponsibly, it will be a real mess.
5. Consolidate your debts. Consider consolidating debts into a single loan which you can repay with a lower interest rates or lower fees. A consumer money expert, Holly Perez, stressed that consolidating loans can help individuals break the paycheck-to-paycheck cycle when combined with other cost-saving steps. “Review your cable, phone and credit card bills for hidden fees, or simply reach out to your service providers and negotiate a better deal. Consolidate your student loans and lock in a fixed rate,” Perez suggested.