There are many reasons why people get into debt. In some cases, it is due to their carelessness. In other cases, they might have been careful enough but they couldn’t escape not going into debt. The problem with debts is that when an individual is not careful, the debt could continue to increase monthly. A debt that is increasing by 10 USD monthly if not watched could have increased by 600 USD within 5 years. This will make it very difficult to offset especially when the reason for the regular increase is that the person spends 10 USD more than they earn monthly. This article will discuss how to get out of debt.
Assess the situation
The first thing you want to do if you want to get out of debt is to access the situation. Observe how much debt you had 5 years ago, 3 years ago, a year ago, and 3 months ago. Notice the progression and see if it is increasing or not. If you notice that the debt you currently have is more than what you had 3 months ago which was more than you had a year ago which was more than you had 3 years ago, then it shows that your debt is increasing. It also simply means that you spend more than you earn. Hence, you will need to address that.
To not only stop the regular increase in your debt profile but also sort out your debts, you need to start budgeting. You must look into your expenses and you will surely find some things that you can do without or at least, that you can live without. You will have to cut off the unnecessary expenses so that you can free some funds. At the topmost of your budget will be an amount to clear off some of your debts. You could read about budget management apps on USreviews to get an app that might help you with budgeting and sticking to the budget.
It is important to be realistic about paying off your debts. You can’t have a debt of 1,000 USD, a salary of 500 USD, and believe that you will be able to clear off your debt in 1 month or even in 1 year. This is especially when there is an interest rate being added to the debt monthly. You won’t be able to spare more than 50 USD to pay off your debt, considering that you were already spending more than the 500 USD monthly to be indebted in the first place. This will also not be the best time to be thinking of saving and investment as well.
Hence, you can budget to pay 50 USD monthly out of your debt, and in 24 months, you would have paid 1,200 USD. Depending on the interest, you would already be through with paying the money. If not, give it another 6 months and you will be through. When you are through with paying the initial debt, you can now divert the 50 USD into a savings account. You can continue to do this consistently and if any unforeseen circumstance that would have made you go into debt again comes up, the amount you have saved will come in handy to save you.
You might also want to make provisions for investments as well after you are through paying your debt. The investment will give you a chance of making good money soon. Hence, once you finish paying off your debt, you shouldn’t go back to spending all your salary again as it could be a recipe for getting into another debt. You should learn to appropriate properly for savings, investments, and expenses, without exceeding your budget for expenses.