It's the end of another month, and you're trying to make ends meet while struggling with debts. Achieving financial freedom can seem like an elusive goal, especially with monthly bills, ongoing debt repayments, and the general costs of living. It's tough to have enough money for indulgences or unexpected expenses. But don't worry - here are six tips to help you get out of debt faster.
1. Create a budget
Developing healthy financial habits is crucial and creating a budget is one of the best practices. Not only does it help you address your debt concerns, but it also allows you to manage your money efficiently. A budget provides a clear picture of your expenses, which helps you control your finances better. When creating a budget, make sure to prioritise paying off your debts. Otherwise, you will only be tracking your expenses without making any considerable progress towards a healthy bank balance.
2. Track your spending habits
Tracking your spending habits is a great way to start managing your finances better. It involves monitoring your expenses and categorising them to see where you can cut back. While some expenses like groceries, utilities, and debt repayments are essential, you can identify areas where you can reduce unnecessary spending by keeping a close eye on your spending habits. You may not realise how much you're spending on non-essentials like take-out meals and online shopping until you start tracking your expenses. By reducing your expenses, you can save money and put it towards paying off your debts. In the long run, cutting down on unnecessary expenses can significantly benefit your finances.
3. Increase your repayment amount
When you do your financial planning, it's important to consider paying a higher amount towards your debt repayments. By paying more now, you can get out of debt sooner than planned and you'll also pay less in fees, charges, or interest. However, keep in mind that you should still watch your budget because there may be some months where you can't sustain paying any more than the minimum. Whether it's for a short or long time, increasing the amount of your repayments will help you pay off your debts sooner.
4. Consolidate your debts
If you find yourself struggling to keep up with multiple debts, each with different repayment arrangements, it may be time to consider debt consolidation. Debt consolidation involves combining all your debts into one, simplifying your repayments by allowing you to make just one regular payment (be it weekly, fortnightly or monthly), and potentially reducing any fees, charges or interest. This is an efficient way to pay off your debts sooner, and with only one payment to schedule, you will remember to make your payment on time.
5. Set up a contingency fund for emergencies
Emergencies or unexpected expenses can often catch us off guard. Whether it's medical bills or vehicle repairs, the last thing you want to do is take out another loan to cover them. To avoid finding yourself in a financial bind, it's a good idea to start putting a little bit aside each week or month into a separate bank account to cover those unexpected expenses. Consistency is key, and by contributing a small amount on a regular basis, you can quickly build up your emergency fund. For example, setting up an automatic payment of $50 each week will result in $1,000 in your fund in less than six months.
6. Increase your income
Boosting your income to allocate more towards your debts can be challenging, but it's not impossible. You could consider selling any unwanted items, getting a part-time job, freelancing, or even driving for Uber. The possibilities are endless, but as shown in the example above, an extra $50 per week would help reduce your debts by over $2,000 each year.
Begin your debt-free journey today
Starting a debt-free journey requires an open-minded approach to finding the most efficient way to achieve your goals. There is no perfect time to revamp your finances and get back in shape, but the sooner you begin, the better. Although it may take time, patience, and a lot of effort, taking the first step is the best way to see where you're heading.
Pay-In-One debt assistance
If you're struggling to pay off multiple creditors and need help combining your debts into just ONE regular repayment, we're here for you. Our services are tailored to those with debts of at least $5,000 to more than one creditor who are having difficulty making payments. If this describes your situation, reach out to us to learn more about our Pay-In-One debt assistance program. What have you got to lose except your debts?