Unchecked debt can snowball, and before you know it, it can feel like there’s no way out. Here are a few tips to get you started on regaining control of your finances:
1. Get motivated.
Setting yourself an end goal and reminding yourself of it every day can help and give you that extra push. Promise yourself a reward each time you reach a milestone, such as paying off credit card debt or sticking below your budget. If you feel negative all the time it can feel like a losing battle and you’ll fail before you even start.
2. Work out how much you actually owe.
It’s a common mistake to think that you only owe what you borrowed. That $1,000 on your credit card can soon double if left to accumulate interest. Make sure that interest rates for each creditor are accounted for: it will probably shock you into taking action.
3. Understand your debts.
As well as thinking about the interest rates and factoring these in to your budget, you need to understand all of the terms and conditions on any contracts and credit agreements that you have. All of your creditors may have different rates and rules so this can sometimes be quite complicated. A loan to consolidate debt can reduce your monthly payments and give you fewer creditors to worry about.
4. Know your options.
The best option for you can take some research but there are many ways to get out of debt, including consolidation loans, a moratorium, a debt agreement or bankruptcy.
5. Negotiate with your creditors.
If you don’t ask, you don’t get - so try asking for a lower interest rate or negotiating lower, more manageable repayments. Often, some smaller level of repayment is better than no repayment at all, and many creditors favour this option. If they say no, re-evaluate - there’s nothing lost.
6. Prioritise your debts.
Pay off the most important debts with the highest levels of interest or for the greatest amounts before focusing on smaller loans and lower rates.
7. Set a realistic budget.
Log every penny you spend and it will help you realise where you are spending unnecessary cash. However, make sure that you budget for emergencies and don’t leave yourself short each month or it will drive you back to the money lenders.
8. Use cash instead of credit cards.
Go to the ATM once a week, only take the cash you have budgeted for and leave your bank cards at home. Physically seeing the cash fly out of your wallet will make you realise how much you’re spending and what you’re spending it on. It will also give you a good idea of where you can make cuts. Credit cards aren’t money - if you don’t have the cash in your wallet, you can’t afford it.
9. Take action against those unnecessary expenditures.
Your log of expenses and those disappearing dollars will soon make you rethink that fancy restaurant reservation. A little expense here and there will soon add up – know when to say no.
10. Don’t be too hard on yourself.
If you give yourself an unrealistic budget and change your lifestyle completely, the chances of you succeeding are pretty slim. Make sure you have room for a treat every now and then to keep you motivated: depriving yourself of everything you love is a recipe for disaster - especially when combined with the existing stress of debt.