The Covid-19 pandemic and the resulting lock down last year meant that many people could not work or lost their jobs. This meant that those who had taken out loans to fund their businesses found themselves in a position where they were unable to repay as they did not have a source of income. In other cases, people just took loans so as to survive during these hard economic times and were unable to repay them.
Defaulting on a loan means one gets listed on the Credit Reference Bureau something which messes up your credit score and ensures that you can’t access more loans in the future till one repays. However, even if you find yourself in such a situation, don’t despair, all you need to do is come up with a debt repayment strategy which will ensure that you are debt free within no time.
Even if you have a small wage, you can get out of debt quickly by making some essential lifestyle changes.
This necessitates dedication, planning, and a strong sense of self-discipline, the good this is that it becomes easier over time as one develop better spending habits.
Here are some tips for getting out of debt;
Stop Taking Out Loans
The first and most key aspect of debt relief is to stop borrowing money. There will be no more credit card swipes, loans, or new debt. The most fundamental change that needs to take place is a shift in your attitude toward money and debt. To avoid furthering your debt, you must first understand the true cost of using a credit card and taking out new loans.
One should make a decision to live on a cash basis while making the changes. Don’t be concerned
about debt consolidation or balance transfers at this time as you are still in the early stages. Also, you don’t want to trade one type of debt for another until you have assessed your situation and devised a strategy.
Keep Track of Your Spending
Determine where your money is going. Without a complete picture of what you pay for and how you spend it, deciding where to make budget cuts can be difficult. It’s a good idea to keep track of all of your monthly bills, as well as your daily spending, for at least a month. When tracking, don’t forget to include your debt payment obligations. There are different methods of tracking your spending i.e keeping receipts, using banking apps trackers among others.
Create a Budget
It is also critical to include financial goals in your budget. Writing down your goals increases your chances of success by 42%. For you, getting out of debt quickly should be your top priority, but don’t forget to set aside money for an emergency fund as well. After you have paid off your debts, you can set new savings goals. Just remember to put them in writing in your budget so as to hold yourself accountable.
Make a Plan to Pay Off Your Debts
Now that you’ve tracked your spending and created a budget, it’s time to implement a payoff strategy. If you need to get out of debt quickly, you’ll need to know how to pay off debt with a plan that maximizes your payoff schedule. Ensure the plan is realistic and achievable, ensure to stick to the plan so as to see results.
Pay as Much as You Can
Whatever your circumstances, it is critical to pay more than the bare minimum. Make this a regular habit. Even if you have a tough month with emergency expenses, try to pay more than the minimum payment.
All in all, getting out of debt is a slow and pain staking process but which is very fulfilling once one can be able to pay off all their debts. So at the end of the day it is worth the struggle, if you are in debt just follow the steps above and kick start you your journey to being debt free.