Starting a budget can help you reduce debt. Analyse how much money comes in and goes out each month, then find ways to reduce unnecessary spending such as dining out or purchasing Taylor Swift concert tickets.
Utilizing the debt snowball method, use any remaining income to address your smallest debt first and focus on paying it off first.
1. Make a budget
One of the first things you must do when setting out to manage your money responsibly is create and adhere to a budget. Doing this will enable you to track where your funds are going, helping you identify unnecessary spending such as dining out at restaurants or making coffee at home.
Once you know where all your money is coming and going, take a closer look at where it is being spent by subtracting all expenses from income to see how much is left over each month (or week). This figure represents your debt payment amount.
Utilizing this figure, you can prioritise your debt payments and bills accordingly. For instance, consider paying off those with the highest interest rates first so they’ll disappear quicker. For help in doing this, refer to the National Debt Helpline’s step-by-step guide.
2. Cut up your credit cards
Cutting up your credit cards is a visual representation of your determination to move beyond debt, making it harder for impulsive spending moments to turn to plastic instead of cash payments. People who have done this report reduced spending since making more payments with cash instead.
As part of a larger plan to improve your finances, card cutting should only be one component. A budget must still be followed and debt payments made regularly on any outstanding loans or debt consolidation loans; furthermore a debt consolidation loan might help by paying off high-interest credit cards with lower rates, though be careful as these could actually add more debt down the road.
3. Sell your stuff
Once you’ve reduced expenses and made significant budgetary improvements, as well as sold off unwanted possessions, it’s time to think bigger. A second job or freelance work could bring in extra funds that can go toward paying down debt.
At first glance, saving while paying off debt may seem counterintuitive; however, saving can help you both dig yourself out and secure a brighter financial future. Saving a portion of the funds used to repay debt will allow you to quickly regain stability once it has been cleared away.
Your proceeds from selling non-essential items can go toward paying down high interest debt in one lump sum payment. Always use cash for this, so you can experience it leaving your wallet.
4. Go on a spending freeze
Spending freezes are designed to force you to assess your finances, appreciate what you already own and increase savings. But it shouldn’t last too long or else they could backfire and lead to greater spending overall.
Plan ahead and stock up on essentials like toilet paper, milk and bread before initiating a spending freeze to maximize your chances of success. It can also help to inform an accountability partner of your challenge so they can offer tough questions if temptation to spend arises.
Predictable finances require planning ahead and knowing where any funds you save from spending will go; for example, to an emergency fund or lump-sum debt payment. By doing this, they won’t go unused.
5. Go for a run
Get out of debt can be a difficult and time-consuming process that may require changes to your lifestyle, but millions have done it and so can you.
One effective strategy to help get yourself out of debt is making small adjustments in your budget that save money by cutting spending elsewhere, such as cooking at home instead of ordering takeout, which not only saves you money but is also healthier.
Cut costs further by freezing entertainment expenses – no movies, concerts or mini golf! Instead, find fun things to do for free: run or stroll through your local park; paint; take up an enjoyable hobby such as sewing; or pick up part-time jobs that allow you to put the proceeds towards debts.