While Coronavirus Persists?
If they continue to pile up, debts can seem like a mountain. Coronavirus is making it difficult.
Your debt mountain can feel overwhelming as the bills keep rising. With proper planning, however, you can quickly get rid of your debt. Talking to a lawyer is a good option if debt management is not possible.
- Be rational
Remaining rational is the first step in managing your debt. You should forget about your emotions because spending can affect your emotional side.
Your priorities are more often emotionally driven than your spending habits. People spend more on guilt, shame, and regrets than they do on their actual needs.
It is important to be able to let go of your emotions, and accept your bad spending habits as they are.
Instead of going on a binge eating spree because you feel the need, look at it from a different perspective and see if it is necessary or not. You can probably hold off if it’s the former.
- Paying your bills on time
Recognizing that you are in a debt trap is the first step towards reducing your debt. It is impossible to get debt-free without admitting that you have a problem. Recognizing that you have a problem is a huge step.
Are you ready for a debt-free future? Start to look at your debts and expenses with a notebook or an Excel sheet. Then, start to see how you can reduce them. The first step is to be aware of the amount you are spending each month on your pockets.
- Stop spending
While you should not stop spending, you can reduce your spending while you are focusing on debt management and overcoming it. This is where you want to be less frugal and more spendthrift. It’s much easier to get out of debt than to continue to spend and accumulate debt. You will spend more rationally if you have a plan of action that outlines what you can do to reduce your debt. This will make it easier to pay less.
- Outline your debts
Step 2 was where you made the conscious decision to acknowledge your debts. Once you have made that decision and are more accountable for your current situation, it is time to get out your notebook, pen, and statements. You should take stock of all debts, including student loans and credit cards.
Next, you need to determine how you got so far in debt. Are there family problems that are affecting your finances? Are your expenses driving you deeper into debt? Are you paying more interest than you should on your expenses?
After you have a list of all your expenses, identify your income sources. What amount are you bringing into the account to pay these debts?
- List your monthly expenses
In your Excel sheet or notebook, list all monthly expenses for the past 6 months. Take all your bank and credit card statements. All receipts for the past months are also required.
It is easier to see your spending habits if you have more supporting documents.
- Prioritize and categorize your spending
Do you remember the hierarchy of wants and needs? You must have the things you need to survive. These are food, shelter, clothing, and transportation. On the other hand, wants are essential luxuries that you need to live. Wants include expensive designer clothes or TV screens.
Once you have all of your expenses listed, begin to categorize them according to needs and wants. Add the amount you spend on each item.
- What is the pattern?
Which are your top three spending areas from the list? Are you spending it on survival-related items or things you want?
What amount of money do you have to live on each month? Are you able to meet your financial needs with your monthly income?
- It’s time to make some changes
It is now time to make lifestyle changes. Reduce all unnecessary expenses to save money. Do you spend all of your money on rent? Move to a more comfortable and affordable house. You don’t have to eat out all the time. Instead, you can buy groceries and cook at home.
If your income isn’t enough to meet your needs, you can save money by cutting out unnecessary spending. If your income is sufficient to meet your needs, the money you save can be used to repay your debts and increase your savings.
- Increase your income streams
It is always beneficial to have more than one source for income. Every dollar earned will help you reduce your debt. It’s okay to look for part-time work that is not your normal working hours. Finding a few hours each day to earn a few extra dollars can make a huge difference at the end the month. Uber can pay for your car, insurance, and credit cards by working a few hours every day after work. You might not be interested in ridesharing, so you should look into other skills that you could develop and consider selling your services to companies or individuals who may need them. There are many ways to make extra money these days. All you need is curiosity and the motivation to find them.
- Professional help
Planning your personal finances can seem overwhelming. A professional can help you manage finances and pay off debts. It is difficult to get out of a debt rut.
These 10 steps are a great place to start. Reduce your expenses first. Next, reduce your expenses and you’ll be debt-free.