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 don’t want to take a closer look at your finances due to excessive debt. Unfortunately, ignoring the issue – unfortunately – isn’t make it go away. Putting together a budget will help you understand exactly where you stand financially.
Here’s what you need to do 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 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, you must do what you can to avoid accumulating more. Make sure you use after-tax income, as this will be the amount you can afford in your budget.
- Calculate your total expenses. Include everything—even that cup of coffee you buy before work. You should then divide your expenses between essential and non-essential costs. Doing this will show you the full picture of how you’re spending your money.
- Look for ways to cut back on spending. There are a lot of ways you can do this. See if you can get better insurance rates or consider moving into a less expensive apartment for essential costs. With non-essential expenses, you need to cut out things 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, here are a few strategies to keep in mind when 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 not pay at all, leading to additional fees and credit problems.
Where should you start paying off your debts? Some people suggest you go right for the highest interest rate balances, as this will reduce the total amount you spend in the long run. This is often referred to as the avalanche method.
Then again, there’s also something to be said about the snowball method’s psychological benefits: you should pay off your smallest debts first. Seeing some progress will inspire you to keep paying off your debts until they’re gone. Whatever you are, 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. Some organizations 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 its lenders. Consolidation is when your debts are rearranged into one payment that goes to a debt assistance company, which they distribute to your creditors. Freedom Debt Relief is one of the top players in helping people with their debt. You can 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 debt. Maybe it’s time to start looking for a new job if you’re feeling stuck in your current position—or ask for that raise if you think you deserve it.
If neither of these options is available to you, start thinking of other ways to generate income. Can you offer any services or products 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
It would help to consider the benefits of selling some of your possessions. Likely, you aren’t using all your stuff regularly. Create an eBay account and start generating money by getting rid of some things. This doesn’t mean that you need to sell everything. However, the more money you can develop in this way, the closer you’ll get out of debt.
Take control of your debt and live your best life! Owing significant amounts of money can be a huge strain on your life. Don’t allow this issue to fester.
