Sometimes it just feels like you owe everyone money – the credit card company, car dealership, vet, furniture store, your in-laws, the hydro company; the list never ends.
Being in debt can be stressful and feel like a juggling act. It may have you looking for payday advances (don’t!! they are a huge money sucker!) or dodging calls from collection companies which is no fun either. In this article, we’ll break down some of the best money saving tips, and how to get out of the bottomless hole we call ‘debt’!
1. Check your figures.
Look at your bills and figure out exactly what you owe. This may seem scary (because it probably is) but it’s the first step in the right direction. After that, write it all down in one place like in a notebook or spreadsheet. This is also a good place to write down the minimum monthly payments you owe and will help you manage them better.
2. Balance a budget.
There are lots of websites with templates for budgets, find one that works for you. Make sure everything is accounted form including: pet supplies, entertainment, fixed costs like rent or the telephone bill, etc.
If you are in the red at the end of the month (i.e. spending more that what you’re making), then the budget doesn’t balance and you either need to make more money or spend less – plain and simple.
Many of these budget sites will also give you an idea of what a reasonable amount to spend on each area is (i.e. 35% of your income on transportation). Use those percentages as a guideline for helping to balance your budget. If they say 50% of your income should go towards housing and you’re spending 75%, that may be a good place to start cutting.
3. Write all spending down.
If you go for a drink after work with co-workers, write it down. If you go to the movies, write it down. Write down every penny you are spending because only in knowing your spending habits can you figure out where you can reasonably make cutbacks.
Tracking spending for one to three months can be very eye opening, and can even curb spending. If you have to write down that you spend $400 on shoes are they really worth it? You can do this in a spreadsheet, a notebook or there are even apps available for your phone to track spending.
4. Make a loan-paying budget.
Now that you’ve made a budget that you are able to stick to you need to see where cutbacks can be made. Spending $600/month on food because you eat out a lot? You should be able to cut some money from that number by planning your menu in advance and eating most meals at home and packing your own lunches.
Are your transportation costs getting deep into your pockets? Consider downsizing your car. A smaller car means less money on gas and potential savings on insurance costs as well. Another way to get money to put towards debts is by bringing in more money. Are you able to work more shifts at your current job? You might even want to consider taking on another job while you’re in debt to help pay down the debt faster.
Bank fees can also suck a lot of money from you. Try and choose an institute where you don’t have to pay for your day to day banking regardless of how many transactions you make or what your minimum balance is.
Got a lot of stuff? There are lots of ways to make a few bucks selling your good quality used stuff either on Facebook, Kijiji, Craig’s List, or by having a garage sale. One man’s junk is another treasure, and that can mean money in your wallet to pay down that debt.
5. Pay off high interest loans first.
Now that all of your debts are written out and accounted for and you have found spare money to put into your debts, you can pay them off. The best place to start is with the one that has the highest interest rate.
Even if that debt isn’t the most amount of money you owe, it’s wise to pay off higher interest loans first. Also, it never hurts to ask. Feel free to call creditors and ask if there is a way to reduce your interest rate.What’s the worst they can say – no? At best it can stop your debt from growing so quickly.
When figuring out a payment plan be sure to meet monthly minimum payments so that your account doesn’t go to collections. Getting hounded by collection agencies can make the whole process much more stressful than it already is.
6. Keep saving!
Some people think that all of their disposable income should go to paying their debts. This might seem smart at the time, but it can really come back to haunt you if there’s ever an emergency that you need extra funds for.
Things like being let go from your job, unforeseen house costs, or unexpected vet bills are just a few things you might have to worry about. Having about 3 months salary saved up is a good amount so that you don’t need to go into debt again or more debt if these emergency situations do arise.
7. Let the bank help.
If you are in way over your head and are feeling overwhelmed, then seeking professional help is a good idea.There are consolidation loans which can take all your bills and put them into one payment. Sometimes these offer a better interest rate this isn’t always the case. Be sure to know what you’re getting into before signing any official documents.
There is also the option of declaring bankruptcy if there’s no other fix for your problem. This is not normally recommended since it can really destroy your credit rating, but is certainly an option to look into if you are feeling smothered by debt.
Getting out of debt is not going to be the easiest thing you’ve even done. It will take time, dedication, and some hard work, but it’s well worth it. Once you’re debt free it will feel like a big weight has been lifted off your shoulders. Get on that spreadsheet, start balancing your books, and get on the path to financial freedom.