Human needs are unlimited but the resources available to meet those needs are limited. The fact that your earnings won’t always be enough to cover your expenses is often a good enough reason to occasionally borrow money in order to make ends meet. However, borrowing money to make ends meet often leads many people into a downward spiral in which they are overwhelmed by their debt burden.
Many people are struggling with huge loads of debt; a 2016 study conducted by Nerd Wallet revealed that average U.S. household owes at least $16,000 in debt. Many people fall into the debt trap because of student loans, mortgages, and credit card bills. However, irrespective of the volume of your debt burden, you can always take proactively steady actions that will get you out of the mess. The article provides insight into 5 tips for dealing with debt decisively in 2018.
1. Face the facts of your debt
The first step towards dealing with debt is to stop living in denial and face facts of your debt. People naturally feel uncomfortable about being in debt; hence, it is normal to be in denial about your debt. However, your debt won’t go away by itself, and if you don’t face the debt, debt collection agencies or bankruptcy courts will confront you with the debt. To face the facts of your debt, make a list of your debts and financial obligations. Don’t be afraid of the final figure of all the debts, success stories abound of folks with much bigger debt who became debt free with consistent discipline.
2. Create a budget
A budget is the next point of action after facing your debt is to create a budgeting plan so that you can gain a measure of control over your finances. An objective look at your debt profile (see 1) will show you that some of the debt are actually simple debts that shouldn’t have piled up if you’ve attended to them in good time. A budget helps to determine where you want your money to go each week or month (depending on your pay cycle) so that you can start working towards reducing your debt.
3. Cut expenses to free up money
Drawing up a budget will afford you the opportunity to think about where your money is going. Hence, the time spent on creating your budget can also be optimized to cut off unnecessary expenses so that you can free up money. For instance, if you normally eat out, you can reduce the number of times you eat out, buy groceries in bulk, and cook your own food. You should also consider trimming your expenses on non-essential items such movies, drinks, and weekly spa treatments.
4. Start paying off high priority debts
Once you’ve freed up some money from your cost-cutting and budgeting efforts, you can start deciding on the loans you want to pay first. You should categorize the debts in the order of their importance – high interest rate debts should have a higher priority than low-interest rate debts. Financial obligations affect your shelter such as rent and utility billsw deserve a high priority.
4. Talk to your creditors
You can’t pay your debts all at once because you simply don’t have enough money to make the payments. You may want to set up a meeting with your creditors to explore possibilities for reviewing the terms of the debt. For instance, you might be eligible for a debt consolidation plan so that you can reduce the level of your financial anxiety by combining all your debt into a single manageable debt with a longer term.
5. Don’t delay in paying your bills
Once you’ve talked to your creditors and have secured a debt consolidation agreement, you’ll need to uphold your end of the bargain. You need to ensure that you don’t default in making the reduced monthly repayments as at when due. In fact, you may want to automate the loan repayment so that you don’t have to think twice about making the payment.