Out of Debt in 8 Steps
If you\’re struggling with debt you need a rock solid plan to get out. The 8 methods in this article are designed to give you that and help you get back on your feet.
1. Know Your Debt Relief Options: Hardship Assistance, Debt Consolidation Loans, Debt Agreements and Bankruptcy. It\’s important you know the pros and cons of each option so you can decide if one of them is right for you. For instance, hardship assistance is great for short term debt relief and doesn\’t leave you with a 7 year notation on your credit file like a debt agreement or bankruptcy. However, if you can\’t meet the repayments long term it\’s not going to get you out of debt. A Debt Agreement is great when you\’re in serious debt stress and can help you avoid many of the penalties of a bankruptcy. However, it\’s not an option when you have more equity in a home than is needed to pay off the debt. All these options can be a minefield when you\’re starting out, so it\’s a good idea to talk them through with a debt expert.
2. Snowball. This is the concept of paying off your smaller debts first and can be a good idea purely for the psychological benefits. Paying off a debt is motivating and by dealing with smaller debts first you get more \’motivational hits\’ in a short space of time, which gives you some momentum for dealing with your larger debts.
3. Write out a budget so you know what you\’re spending on and how much you have coming in. A lot of times people get into trouble because they lost track of where they\’re making losses each weeks – eating out, expensive weekends, alcohol. A budget will help you figure this out.
4. Start swapping. Look for areas in your life where you can swap an expensive choice for a less expensive one. For instance, making your own lunch 2 days week, watching movies at a cheaper theatre or getting your haircut at a cheaper location. Whilst you might have to cut out some expenses entirely, there are others where you may be able to get away with just substituting with a cheaper option. Swapping also makes your budget more realistic and achievable, meaning you\’re much more likely to stick to it.
5. Speak with your lenders. When times are tough financially, consider calling your lenders and work out a temporary repayment plan that works for both of you. Any hardship assistance will likely be short term, but that should allow you to get back on your feet if you\’re problems are not too severe.
6. Hold a garage sale. Bring in some much needed cash by selling those things you don\’t really need or trading them in to second hand retailers who buy from the public.
7. Pay in cash. Only buy what you can afford to pay for with cash. If you need to buy it on credit, it\’s not affordable and you should hold off buying it until you are able to pay in cash.
8. Use a different lender. Chances are, whatever you\’re lender is offering you, there\’s someone out there who can do better. Try looking around to see who has great packages enticing you to switch. Look at both the introductory and long term benefits they can offer and if it\’s worth it, make the switch.
Although debt problems are stressful, there\’s always a way out. Keep these 8 steps in mind and you\’ll be well on the road to finding that way and breaking free from debt for good.
Want to find out more about Debt Agreements and other debt relief options, then visit Graham McDermott\’s site on how to choose the best debt relief solution for your needs.