Are you battling with debt and you seem not to be wining the battle? Have you tried all within your power to get rid of your debts, but your efforts haven’t yielded any positive results? If this is your situation, then this post is for you.
You can’t build wealth as long as you remain in debt because, it will keep pulling you down financially, especially if you are into high interest debt. Also, being in debt can be lead to various kinds regards of embarrassments from your creditors, when you are unable to repay the loans. Also, not being able to repay your debt can tarnish your credibility and hinder you from getting business deals and loans for business expansion.
Therefore, getting out of debts should be a priority to you and it should be one of the first steps any one who is serious about getting wealthy should take. Below are 11 steps you should take to get out of debt and live a more peaceful and happy life.
1. Be determined to be debt free – Many people who are in debt have not really made up their minds to get out of debt. They just wish to be debt free but, they are not determined to do what it takes to be debt free. Borrowing can be a habit and may not be easy to stop. It therefore requires some level of determination and a firm resolve to make the needed sacrifices to stay out of debt.
2. Identify what got you into debt in the first place – There is need for proper assessment of what got you into debt in order to know how best to prevent reoccurrence. Most times the causes of debt is related to a lifestyle or habit. You need to change the behaviours or habits that get you into debts. Some of the habits include, excessive spending, impulse buying, greed, lack of contentment, living above your means, lack of budgeting, and even improper use of credit cards. If using credit cards always lure you into excessive spending, then stop using one.
3. Live within you means – You need to cut down spending. Spend with a budget. Avoid the pressure to impress people. Don’t live a fake life! Be real. Most times, the people you are trying to please don’t really care about what you are trying to show off. People are usually bothered more about their problems, instead of giving attention to you. Therefore, stop trying to please anyone.
Live within the provisions of your resources. If you can’t afford something, then forget about it for the moment instead of borrowing. Wait until you have saved up for it. If you need to buy something that you cannot afford at the moment, make a savings plan and save for it. It may take months or even years to save up for big purchases. However, you will have more peace and rest of mind after you have saved up and bought what you plan to buy instead of borrowing to buy it
4. Pay off debts with the highest interest rates first – The law of compounding can keep you forever in debt. Interest rates matter a lot in loans. If you allow your debts to hang on , after sometime, your debt would have increased in value due to compounding interest on the loan.
Therefore, in trying to pay off your debts, it is better to start with the high interest loans. When you succeed in paying the high interest loans, then you can gradually pay off others.
5. You may consider consolidating & refinancing your debts – Debt consolidation means aggregating your debts and borrowing money from another source to repay the various small loans. By this way, you only get to owe just one major debt and then you work out a mode of repaying it gradually. This is usually applicable to those who have multiple debts.
Refinancing your debt means taking a loan with a lower interest rate so as to pay off the loan with higher interest rate. For example, If you get a loan of say 5% interest rate you could take it to offset a loan of 10% interest rate.
6. Stop borrowing at all cost – No matter how appealing a loan is, avoid taking it. Resist the temptation to borrow. You may stop using credit cards until you are out of debt.
Even if you want to start a business, I usually advise prospective entrepreneurs to start small with the money they have. Start small from your savings and grow the business. When you are sure that the business has become profitable and needs extra funding for expansion, then you can get a low-interest loan. I encourage business loans, for business expansion instead of start-up.
7. Find extra sources of income – Let your needs or wants be a motivation for you to think of more ways to make more money. Use your needs and wants to unlock your thinking and creative abilities. Resist the temptation to go for the easy way out and borrow. The easy way is not always the best way. You can try getting a part time job in addition to your current job. You can work extra hours or work over time. You can sell stuffs physically or online. There are many side hustles you can take advantage of to get additional income.
8. Develop a repayment plan – If you don’t develop a repayment plan, trying to get out of debt might just remain as a wishful thinking. A repayment plan defines how you intend to pay off your debts. It involves setting SMART objectives that will enable you to achieve your goal of paying off your debts.
You can decide to dedicate a certain percentage of your income monthly to paying your loan. You may even automate your repayment at your bank, so that every month your income account has a standing order to pay an amount of money to your creditor until the debt is fully paid off. Afterwards, you can suspend the standing order.
9. You can sell what you don’t need to pay off debt – There are several stuffs which you have but you don’t use. Instead of allowing them to keep staying in your house without being used, you can sell them to pay off your debts.
Also, you may even sell off an expensive item that you can do without and buy a less expensive but reliable item to satisfy same needs. For example, if you have two cars, you can sell one and use the money realised to pay your loans. If you have an expensive car, you may sell it and use the money realised to buy a reliable and less expensive car and then put in the extra funds into debt repayment.
10. All extra funds you make should be put into debt payment – Until you get out of debt, all extra funds that you make should be used to pay off debts. Overtime earnings from your work, monies realised from selling properties which you don’t need, bonuses, tax refunds, monetary gifts, earnings from a side hustle are all sources of extra funds that you can put into loan repayment.
Don’t worry. When you get out of debt, you can continue enjoying the extra funds. However, for now, you need to use these funds to set yourself free from the shackles of debt.
11. Surround yourself with friends that will help you – If you keep hanging out with friends who are comfortable being in debt, you too will most likely remain comfortable being in debt. You need friends that will provide the needed support you need in terms of encouragement directly or indirectly to enable you to confront your debts and get out of them. Get closer to such people.
The power to get out of debt lies in your hands. However, you need to be serious about it by taking the needed action required to achieve it. You need to be deliberate about it and be willing to make some short-term sacrifices for your long-term happiness and peace. Many have done it successful and so can you.
What are your thoughts about getting out of debt? Have you been in debt and succeeded in paying it off? What method did you use? Please share your experience with us using the comment section below.
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