Are you in debt and think that it is nearly impossible to solve it? Yes? It is time to change your thoughts. At least try to pay it off before losing hope.
Here are 7 easy-to-follow steps to confront debt and pay it off.
1. Assess how much damage already has been done
How can you make your action plan if you don’t know exactly what you need to do? So, at first, sit down with pen and paper or an excel sheet, and calculate how much you need to pay off.
Doing so, you might get upset; but, believe me, it will help you to overcome your debt problems.
So, make a list of the account names, the rate of interest, and the outstanding balance.
2. Calculate maximum how much you can save
The next step is to assess how much you earn and what amount you can save without much difficulty.
To do so, first of all, calculate income from all your sources. It should include your monthly paycheck along with yearly bonuses and extra earning, if any..
The next step is to plan a suitable budget; it is an essential thing. When you are able to plan a suitable budget, you can be assured that half of your work is done.
It should be a budget which you’ll be able to follow with ease. It won’t help if you make a fantastic theoretical plan which is almost impossible to execute.
Don’t worry! It won’t happen overnight or in 1 month. It will take some time to plan a suitable budget and you also need to modify it from time to time; try to assess and plan one every month as per your debt payoff progress.
The primary motive is to stop living paycheck to paycheck or saving a trivial amount; you will have to save a decent amount to confront debt and pay it off.
3. Look for a part-time job in your leisure time
If you think that your income is not enough to save the required amount you need to become debt free, look for a part-time income opportunity.
You can even check online for various job opportunities to earn a decent income every month. It is advisable you choose one as per your liking so that you feel motivated to work at your leisure time.
4. Ask yourself before spending any amount
You need to follow this strictly. Always before looking through the items in the aisles and taking out cash or credit card to make the payment, take out just 1 minute and ask yourself whether or not you need that item, or it is just your want.
Even if it’s your want, you can decide whether you should spend your precious dollars for that item or you can wait for some time, till you pay off your debts.
And this strategy you need to follow even if you’re spending $1.
5. Make a suitable debt relief plan
Again I stress on the point “suitable”. Unless it is a suitable debt relief plan, it’ll be a bit difficult to follow it.
So, gather knowledge about the possible debt relief options and choose one or a combination of debt payoff strategies. You can choose DIY option or professional debt relief strategies, as per your choice and financial condition.
6. Do not forget to create or maintain an emergency fund
While paying off debt, do not compromise with building or maintaining your emergency fund. A financial emergency can lead you to debt again if you don’t manage your finances properly.
So, if you don’t have an emergency fund, build one. Deposit a certain amount every month into this fund.
If you have an emergency fund, continue depositing an amount into it, every month.
Pay an amount into your emergency fund even if it takes a little longer to pay off your debts.
7. Stay motivated throughout your debt relief process
It is important to stay motivated till you pay the last cent. Always remember, you’re not alone in this journey. A number of people are struggling to confront debt and pay if off.
How will you stay motivated? Is it difficult?
Well, it may be a bit difficult, but not impossible.
Just plan some rewards for yourself after you pay off a certain amount. It will help you stay motivated and accept the little compromises you need to make in your debt free journey. Remember that debt is not always bad, rather it is a way of life. You can learn a lot of things when you fall in debt and work toward finding a way out. By solving your debt problems, you learn how to manage your money properly to improve your financial life.
Andy Masaki is a freelance journalist living in Oakland. He works for Oak View Law Group , a leading consumer and bankruptcy law firm based in CA and operational across US.