9 Ways To Get Out Of Debt Fast
Creating your own plan to get out of debt is possible, as far-fetched as it may seem. However, with fundamental changes to your spending habits, commitment, and professional advice, you can overcome your debt no matter your monthly income.
It becomes easy over time as you readjust your spending habits. But, don’t wait to regain control – there are many ways to get out of debt, fast.
1: Stop Borrowing Money
The first step starts with a definite decision – stop borrowing money and stop spending money that is not yours.
A good step to take is to actually cut up your credit cards, don’t worry about debt consolidation at this point. In these early stages, you don’t need to understand how debt works or how to swap one debt out for another.
Try to live exclusively on a cash basis during these early stages. This way, you get into the habit of spending only what you have.
2: Track Your Spending
Now that you’ve decided to overcome your debt, step two is to figure out where your money is going. This way, you’ll figure out where you can make budget cuts and repurpose your funds.
Don’t forget to also factor in your debt obligations when tracking your finances.
Some tips include:
- Using a budget worksheet.
- Keep written notes.
- Make use of a money management app.
- Utilize banking app tracking tools.
- Keep all of your receipts.
Keep track of your monthly bills and daily spending for at least a month. Whichever tracking method you use, remember the goal is to fill in the picture of how much you are spending.
3: Form A Budget
Once you’ve tracked your spending you can begin using it as a guide, the next step is to create a budget.
Your Tracking will reveal where you should cut down, as well as which areas you simply can’t afford to cut down on spending, remember it’s about balance and not suffering.
It’s vital to put your budget down in writing; you shouldn’t rely on mentally planning how much you intend to spend.
Your budget should also include your financial goals; you’ll be 42 % more likely to reach them if they’re written down. In this case, your goal would be to be debt-free; once you get there, your goals will be geared towards saving money.
4:Implement A Pay-Off Strategy: The Snowball Method
With your spending tracked and your budget is drawn, you now know what you are dealing with and can begin implementing a payment plan.
One of the quickest ways to clear debt fast is with the ‘debt snowfall’. It works by paying your minimum monthly instalments to all but one of your debts. For the debt instalment you’ve chosen – pay as much as you can possibly afford. That specific debt will be paid off quicker, and when it’s done, you can move to the next.
Over time you’ll find that your repayment budget snowballs, the available amount you have to pay your debt each month will increase as your debt instalments decrease. The best way to choose which debt to start with – consider the one with the highest repayment rate.
5: Debt Review
If you find that, despite reviewing your budget and prioritizing your debt payments, you are unable to make ends meet – then debt review is the way to go. All of your debts can be combined into one affordable monthly instalment, simplifying the repayment process.
This brings peace of mind that you’ll no longer be harassed by creditors or face the repossession of your assets or black-listing.
6: Commit Cash Windfalls To Debt Repayment
Tax refunds, yearly bonuses and any form of unexpected cash windfall should be repurposed towards debt repayment.
It can be tempting to spend it on something extravagant. This lump sum payment strategy can reduce monthly instalments and lighten the load. You could even consider splitting it 50/50 between debt repayment and spoiling yourself.
7: Find Ways Of Making Extra Income
Think of any skills you may have that could help you earn extra money, from baking to blogging online or renting a listing on Airbnb.
The pandemic forced many people into coming up with side hustles, and the possibilities are endless; it will be hard work, but seeing your debt reduced at your own hands will be rewarding, and who knows, maybe you discover a new career path.
8: Sell Items for Cash
Make a list of items you could sell; you could put together a garage sale or sell items on Gumtree or OLX. Use the proceeds towards lightening the load on your debt.
9: File For Bankruptcy
This should only be used as a final resort and under extreme circumstances. For example – if you have no monthly income and you’re drowning in credit card debt or medical bills.
Final Note: Get Professional Help
For any journey towards a debt-free life, contract the services of a debt counsellor; you don’t need to go it alone.
At Pioneer Group – our professionals are non-judgemental and handle each case with care and discretion. As a result, we have helped many struggling South Africans become debt-free, financially healthy and independent.
If you want to live a debt-free life but don’t know how – you can get help now. No matter what your circumstances, our debt review process will help your situation.