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Personal Finance Tips to Get Out of Debt

by Josh Biggs in Finance on 13th March 2020

Debt is a major problem and can wreak havoc on virtually every aspect of your life. While it can be easy to take out credit cards to buy things when you don’t have the cash outright, many credit card companies charge enormous fees associated with transactions. Likewise, you might have past student loans, mortgages and debt obligations that are simply becoming too much for you to handle. Taking control of your finances is key in terms of paying off any and all of your existing debts.

Stop Overspending

Overspending is a real issue that most people do without even realizing it. You go out to eat more often than you cook at home, you sign up for subscriptions and streaming services that aren’t necessarily needed. When you overspend, you have less money in your bank account that can go towards debts. Furthermore, you’re putting yourself into more debt if you use credit cards to purchase things while shopping.

Create an Emergency Fund

A good place to start is having a savings account with at least $1,000 as an emergency fund. The reason for needing this account and money is because it prevents you from needing to use a credit card to compensate for an emergency. Emergencies happen, like needing car repairs or having to replace a major appliance in the home. If you have the money set aside for when these problems occur, you’re less likely to put yourself into deeper debt to pay for these things.

Consolidate with a Personal Loan

Taking out a personal loan is a smart idea when you have a number of current active credit cards with balances. Credit card companies are notorious for increasing interest rates and incurring fees. Likewise, it can become confusing to try to pay off all of the credit cards that you owe, and you may find that you accidentally forget to pay one or more companies because you just forgot underneath the sea of bills that you receive. When you take out a loan, you can pay off all of your balances with the money you receive. You then have one easy, simplified payment to make each month towards the balance of the loan.

Pay More Than What’s Due

If you only pay the minimum due for each account that you have, you’re likely not putting anything towards its principal. For this reason, you need to put more than what’s due towards balances, even if it just means throwing a few extra dollars when making out the bill. It can sometimes be difficult to put a lot towards debt if you’re struggling to make ends meet as it is, but it’s crucial that you try to get those debts paid off quickly to eliminate the paycheck-to-paycheck mentality.

Establish a Strict Budget

Budgeting is an important part of eliminating overdue balances that you have currently. Living on a budget can be difficult, especially if you’re used to spending your money freely. However, when you budget and stick with it, you’ll have more money set aside to put into a savings account and to put towards any balances that you owe.

Categories: Finance