Now more than ever, many people find themselves up to their necks on debts, which comes to no surprise considering how easy it is to get caught in debt.
With credit card companies spending millions on advertising, inflation is on a constant rise without a significant rise in wages, even the simple costs of living may find even the most budget conscious people with debts that they would otherwise avoid given the choice.
Thankfully, there is some good news, not all hope is lost. With the right budgeting strategy, cutting costs in specific areas, and a little savvy, anyone can achieve a life of financial freedom much sooner than you may think.
To mitigate the guesswork, today we’ll discuss a few ways to tackle debt and become a boss with your finances. Let’s jump right in:
In This Post:
1 – Failing To Plan Is Planning To Fail
First things first, you need to establish a debt repayment plan. As daunting as it sounds, it very simple. Consolidate all of your current debts by collecting all you billing statements, what the total balance is on the debts, the minimum monthly payments, and what your total income is per month.
2 – Establish a Rainy Day Fund
It’s understandable and totally natural to want to throw every cent you make towards your debt, but this isn’t necessarily the way to go. It may seem counter intuitive but saving money for a rainy day is essential. Just because you’re paying everything down doesn’t mean life stops happening, nope, the world keeps turning either way.
A general rule of thumb is to plan for the worst case scenario, like a vehicle or household repair, an unexpected injury to a pet, loved one, or yourself , or worst case scenario in this instance, losing a job.
The standard rule of thumb is to put back 20% of your next income, but it may be an unrealistic figure given the present circumstances, so crunch some numbers and see what percentage you’re comfortable with and tuck it back for a rainy day.
One easy way to save for an emergency fund fast is to cut expenses. There’s nothing wrong with treating yourself every now and again, we all have out vices; but if you’re the kind of person who eats fast food or buys a pack of smokes everyday, you may consider cutting those costs and putting that money back, you’ll be both surprised, if not shocked by how quickly that money adds up. If you work remotely or travel a lot, work on finding cheaper travel options and be very dynamic with your savings.
Given the current state of technology, you could even go a step further and have your employer deduce a specified amount from each paycheck and have them put it in a savings account. If you’re unable to do it directly, most banks will allow you to set up an automatic deduction from your checking account each time you get paid.
3 – Calculate Your Total Debt Number
Factor in how long it will take you to pay off all the debt you owe based on the remaining balances of each debts by adding the total together and you will have your total cumulative debt. It’s a bit of a reality check at first, but once the initial shock subsides, you’ll have the exact number of how much you owe and you’ll have a goal to work hard towards.
It’s a little gut wrenching to see a massive number that you owe, but it’s important to have an exact overview ahead of time before diving in and planning your strategy.
Once you start making payments, refigure the number so you can see that number getting gradually smaller and smaller, reenforcing your strategy is working, plus it just feels amazing to see all the hard work paying off.
4 – Be Aware of Your Habits
One of the main reasons we get into debt in the first place is our behavior. Having an in-depth understanding of oneself will ensure you’re aware of how you got into debt in the first place.
Sure, sometimes the unexpected happens and you have no choice but to fall into debt, but more often than not, it’s as simple as spending more than you make, but awareness is key.
Being A Boss With Your Finances
Being in debt is one of the most stressful things a person can endure, but keep in mind that it happens to almost everybody, and it’s not like the circumstances are meant to work in our favor. Companies, banks, and schools want us in debt because that’s how they make money, but you’re now aware and you have a plan, it’s all upwards from here.