In life, for many of us, purchasing something having value over our current savings or budget is only possible by taking a loan or buying on a credit card. Example- buying a house or car, paying for education, etc. Many times it is a way to make our dreams true right now. On the other hand, someone might have accumulated debt because of some unavoidable situation or emergency.
If you pay credit card bills and loan EMIs on time, then using them is good. If you keep on taking loans and miss their payment, then it will pile up. You may face situations where coping up with increasing debt has become stressful. Sometimes you may feel that it is not going to end.
Many people think that taking debt to live life is usual or getting debt-free is impossible. In reality, a person needs to change his mindset to get debt-free. Getting debt-free needs willingness, readiness to put extra effort, and planning.
Budgeting for debt payments
Take out your last three-month credit card and bank account statements. Reviewing these will give you insight into your spending habits and major expense categories. It will highlight unnecessary expenses like unused subscriptions, frequent eat-outs, etc.
Better start using an expense manager to note down your daily expenses.
You can sell unused items and get some extra money. It will free up some dollars for your debt payment.
You can break your low-interest-paying investments to pay towards debt, for example – a money-back insurance policy, fixed deposits, etc. It is a good idea to include all debt payments in your budget itself.
Increase Income Sources
High debt accumulation is an indication for you to increase your income. You should find ways to create a second source of income. It does not mean to work double shifts or 80 hours a week. You can take out some time to do the activity can help in earning some money. For example, you can sell stuff online, write blogs, create YouTube videos, teach kids, etc.
Debt payment strategy
Write down all your debts from a higher interest rate to a lower one. Personal loans and credit card debt comes with doubt-digit interest rates.