Debt is a sensitive subject. Nobody wants it and nobody wants to discuss it. But almost everyone in America has it to some degree. For some folks, it’s manageable. But for others, it’s a much more significant issue. Debt can quickly spiral out of control if it’s left unchecked.
Here are five solutions to repair your unmanageable debt.
Create a Budget
Building a budget isn’t a fun activity. This is especially true if you really don’t want to take a closer look at your finances due to excessive debt. Ignoring the issue – unfortunately – isn’t going to make it go away. Putting together a budget will help you understand exactly where you stand financially.
Here’s what you need to do in order to create an effective budget:
- Collect all your financial documents, such as bank statements, bills, and investments. You’ll want to see exactly how much money you have in total, and how much you owe to various lenders.
- Total up all your sources of income. Knowing your exact income will tell you the most you can spend each month. When you have out-of-control debt, it’s important that you do what you can to avoid accumulating more of it. Make sure you use after-tax income, as this will be the true amount you can afford in your budget.
- Calculate your total expenses. Include everything—even that cup of coffee you buy before work. Doing this will show you the full picture of how you’re spending your money. You should then divide your expenses between essential and non-essential costs.
- Look for ways to cut back on spending. There are a lot of ways you can do this. For essential costs, see if you can get better insurance rates, or consider moving into a less expensive apartment. With non-essential costs, you need to cut out things that you aren’t using enough to justify the money. Eating out is one of the biggest ways people spend too much without realizing it—about $3,000 per year on average.
Determine How to Approach Your Debts
There’s no one-size-fits-all solution for solving your debt issues. However, there are a few strategies to keep in mind when you’re wrangling your debt. You should do your best to pay more than the minimum on your credit card balances. But at the same time, it’s better to make the minimum payment than it is to not pay at all—which will lead to additional fees and credit problems.
Where should you start paying off your debts? Some people suggest that you go right for the highest interest rate balances, as this will reduce the total amount you pay in the long run. This is often referred to as the avalanche method.
Then again, there’s also something to be said about the psychological benefits of the snowball method, which says you should pay off your smallest debts first. Seeing some progress will then inspire you to keep paying off your debts until they’re gone. Whatever you, waiting to get rid of your debt isn’t the right decision.
Consider Debt Negotiation or Consolidation
If your debt issue is pressing on you, it might be time to seek outside assistance. There are organizations that exist specifically to help people who have gotten in over their heads in loans.
Debt negotiation and consolidation are two typical types of debt relief. They both work in the ways implied by the names. Negotiation is when a company works out more favorable terms with your lenders. Consolidation is when your debts are rearranged into one payment that goes to a debt assistance company, which they then distribute to your creditors. Freedom Debt Relief is one of top players in helping people with their debt. You can take a look at Freedom Debt Relief reviews to see how they’ve helped so many real people get their lives back on track.
Find Additional Sources of Income
Making more money is one of the most effective ways to get out of debt. Maybe it’s time to start looking for a new job if you’re feeling stuck in your current position—or else asking for that raise if you think you deserve it.
If neither of these options are available to you, start thinking of other ways you can generate income. Can you offer any services or products that people might want to buy from you? Can you freelance or take on a part-time job? These are all ways you can get a bit more cash flow.
Sell Your Unused Possessions
You should also consider the benefits of selling some of your possessions. It’s likely that you aren’t using all your stuff on a regular basis. Create an eBay account and start generating some money by getting rid of some things. This doesn’t mean that you need to sell everything. However, the more money you can generate in this way, the closer you’ll get to getting out of debt.