Isn’t it ironic that, just before the holiday season starts, you get messages from all your debtors that you qualify for a limit increase? While the one half of the population struggles to make ends meet, the other half keep pushing and pushing the strugglers that the only way they’re going to succeed in life is saying yes to that increase, because damn, it feels so good to see that cash on your card. In a short period of time, you’ll notice emails and red coloured envelopes begging you to make some sort of payment to the loan or credit you owe. This should send huge warning signs through your brain as it’s a clear “I can’t pay my debt” siren. So, how does one cope with this debt or no-debt fiasco?
Tip #1 – Create a budget
Without a month to month budget, your debt will keep increasing until you can’t keep up, resulting you falling into the hole of debt. To eliminate this, you need to create a budget. It need not contain graphs and information that only professional financial advisors would understand; it simply needs to clearly show your income on the one side of a page with your expenses, including essentials and entertainment, with all your types of incomes such as a salary, on the other side. According to the financial specialists at Olsson Capital, balancing the expenses against your income will give you a clear idea of how you are spending your money as it is coming in.
Tip #2 – Pay more than the bare minimum
The fact of the matter is yes, you need to cut down on life’s luxuries in order to pay off your debt. Now there is yet another debt catch; in order to have what you want, you make debt but in return, you need to live on a lot less to pay off the debt you have made. So, simply put, you need to pay more on your monthly instalments than the statement requires. As you pay only about 2 or 3% of the total debt you’ve made each month, the debtors laugh all the way to the bank as they keep you in a loop by making you pay interest on your debt for a longer than absolutely necessary time.
Tip #3 – Renegotiation
Renegotiation seems like a really harsh and almost impossible thing to do, but if you wish to pay off your debt without filing for bankruptcy, it is an option to make your debt hole a little shallower. Negotiating with them doesn’t make your credit score lower; it simply means that you can’t keep up with your debt. When renegotiating your payment terms, you need to ask your creditors for a lower interest rate as well as a lower payment schedule. This way, you’ll be paying your debt off for a longer period of time but the amount you will need to pay each month will be significantly lower.
Tip #4 – Most expensive debt comes first
When trying to figure out which debt to pay off first, you need to make a list of all the debt you need to pay off by looking at your personal finances. The one you choose to pay off first should be the one that’ll give you the biggest boost. By taking that into consideration, it’s a better idea to pay off the debt with the highest interest rate first.
Tip #5 – Balance transfers
Having a credit card with a high interest rate that you will be able to pay off within the next few months can benefit you in the way of transferring your balance to a zero interest rate card. However, you need to apply for this and you’ll never know what rate you receive until you apply, thus giving this debt paying strategy a great deal of risk to it.
Tip #6 – Stop spending on your credit card
If you take the time to have a look at the number of transactions you put on your credit card, you’ll understand why I’m saying this. With credit cards having some of the highest interest rates of all debt types, the more you spend on your credit card, the more interest you will have to pay, so it’s quite easy to put the whole strategy together.
Tip #7 – Extra cash? Pay off debt
This is where creativity meets debt. If you have extra cash, you would want to spend it on a treat for you or someone close to you. Although this seems ideal, an even better idea would be to use that money to pay off excess debt or make the month-end rush to get your bills paid much easier. But what happens when you don’t have extra cash? Simple, you earn extra cash. Earning a little extra money on the side to help pay off your debt is a great way of building a sustainable credit score.
Tip #8 – Make sure that online stores don’t have your information
Ah, yes! The ever-present credit sharks have your information, whether you tick the box on your credit application form that you do not want your contact information to be made public or not. Credit companies have a sales team that use a wide variety of statistics and programs to ensure they stay in contact with every single person in need of credit.
Combining all 8 of these tips will not only help you pay off your debt quicker but make you debt free in a very short period of time and who wouldn’t want to be debt free?