How many of you are stressed due to heavy debt?
If you are one of those, remember, you aren't alone. Numerous people across the globe are struggling to cut their debt and live a peaceful life with timely repayments. Most people even prefer clearing their debts quickly to stay away from monthly repayment stress.
What is considered debt?
Any amount that is owed or due on your end is considered debt. More often, debt includes EMIs, and monthly bills (recharge, power bills, subscriptions, etc.)
According to the stats, household debt is rapidly increasing with time, and there are numerous reasons behind this increasing debt. Below are the primary reasons why the debt count increases.
Low Income: Some people have low income, which makes them incapable of meeting their end needs and paying the essential bills. Moreover, they fail to put a small portion towards saving and securing money for the future. If they try to pay bills, they are left with some other unforeseen payments that cause further problems.
Relationship Issues: Experts always recommend couples to earn money to build a strong financial base. Yet, some couples rely on a single income source that is highly affected in case of any relationship issue. Divorce is a common scenario that brings one partner into debt.
Poor Money Management: It's always better to get on top of your debts before they get on top of you. Yet, many people skip this and don't follow money management practices. Hence they end up with high debts.
High Cost of Living: Having a high standard of living compared to what you earn is a common problem in the debt crisis. People often prefer costly options when they aren't financially prepared to afford one.
Overuse of Credit Cards: Nowadays, everyone owns at least one credit card. However, not everyone has adequate knowledge of using a credit card smartly. Many of them make excessive use of credit cards, resulting in high debt.
Unexpected Expenses: Many people aren't prepared for unpredicted expenses, and when one comes, it drains your wallet, causing a significant monetary loss. In such a situation, you face challenges rebalancing your finances and bringing everything on track.
Increasing Health Expenses: Healthcare can be expensive, especially when you are undergoing frequent health issues. If any of your family members face health issues, it will increase the health expense creating a debt crisis.
Unexpected Job Loss: During COVID19, countless people lost their jobs, which created a disastrous situation financially. With job loss, people were left with small savings only to sustain their lives for a few months. Some don't even have any emergency funds to combat their financial trouble during a global pandemic.
Taking Higher Education: Whether you are planning to get higher education or have kids planning the same, you would require enough funds to pay tuition fees, hostel fees, and other daily needs. Failing to meet this requirement, most people prefer taking money as debt and start their education.
Not Having a Monthly Budget: Every successful homeowner has a proper budget plan that helps them sustain all (planned and unexpected) finances within the month. Yet, some don't have a monthly budget and hence spend without a budget constraint.
Having Failed Business: Some business owners face failures in their business journey. Regardless of failure reasons, this takes you into debt.
These are some of the major reasons that can take you into debt.
Now, getting into debt isn't a big problem as you can easily cut down your debt and maintain a peaceful life. Below are seven great ideas that can help you move out of debt faster.
Option 1: Start Paying More than Minimum:
Most probably, you are currently paying the minimum credit card balance, which is adding an extra burden for the coming month. With minimum payment, you are slowing down your debt recovery.
Every credit card bill includes two payments, i.e., minimum payment and full payment. If you pay the minimum payment, you can save time in repaying the rest amount. If you skip your timely payment, you will get a late payment warning. It will come with late fees on your outstanding amount.
Paying a minimum amount will moreover save you from penalties, but it adds high interest on your left-over amount. With time, if you continue repaying the minimum amount, you are not saving time for repayment. Instead, you are increasing your debt. Moreover, the interest amount on your bill will continue to grow with time.
So, prefer paying the total amount instead of the minimum amount and completing the credit card dues in a single go.
Option 2: Revamp Your Budget:
If you are into debt, it's obvious that your monthly expenses are far more than your budget. If you are wasting money, it's the right time to review your monthly budget and evaluate where you are missing out.
Presently, your prime focus should be clearing your debt. Hence, it's crucial to track your every expense and match it with your monthly budget. If possible, revamp your monthly budget to limit your expenses and save more to pay off debt. Once you start following your new budget, you can get enough funds to pay off your debt quickly and start enjoying your life as per the previous budget. Till then, you should alter your budget to save more and spend less.
Option 3: Create a Debt Payoff Plan:
Once you are into debt, it's crucial to make a solid and effective payoff plan. You should start identifying your unnecessary expenses in your budget and cut those spending for the debt payoff plan.
Creating a plan is easy, but trouble occurs when you try to follow it regularly. You should stick to the debt payoff plan to achieve your goal and move out of debt quickly.
Debt Snowball and Debt avalanche are two common methods to clear your debts. In the Debt snowball method, you start paying small dues and move forward till the last and biggest debt is cleared. On the other hand, Debt avalanche suggests paying off large debts first and moving to small debts.
If you are concerned about high-interest penalties, it's better to opt for the debt avalanche method. But, if you are focussed on clearing the debt with a small start, go with the debt snowball avalanche.
Option 4: Look for Low-Interest Rates:
You have already read about common reasons behind the debt crisis. If you are in debt, you can reach your bank and negotiate for a lower interest rate. You are a good customer if you are paying your dues on time without skipping any EMI. This can leverage you with an option of a low-interest rate.
However, no bank will assure you of a low-interest rate on your loan, credit card, or other forms of credit. However, if a bank finds you a worthy customer with a clean payment background, they can somehow help you reduce your debt.
Option 5: Take a Personal Loan to Consolidate Your Debts
You are often under stress due to multiple debts that create a hefty sum. If you cannot repay them all, it's good to opt for a personal loan and clear all your debts. With this, you will only have a single loan to pay, which is better than multiple debts. Managing single debt is far easier and more convenient than multiple debts that cause mental and financial stress. If required, you can increase your personal loan EMI and decrease its tenure to clear the debt quickly. This way, you will also save money on interest rates.
Option 6: Start Part-Time Work:
If you have skills and good connections, you can ask for a part-time job that gives you an extra income source. You can then save the extra income and clear your debt quickly. Once your debt is cleared, you can continue your part-time job and start creating an emergency fund for the future.
You can either ask your connections or dig into numerous online part-time job platforms. Upwork, Freelancer, Fivver, etc., are some popular platforms that can give you a part-time job with a handsome income.
Option 7: Sell Your Unnecessary Stuff:
If you declutter your home, you will find numerous items, not in use. Instead, they are only occupying your storage area. You can, however, make money from such things. It's better to declutter your home and sell all unnecessary items that can give you a good amount in return.
From your tennis rackets to DVD players, multiple motorbikes, electronic items, etc., you can shortlist them and list them on online selling platforms. Use all that money to lower or clear your debt.
That said, you now have enough options to move out of debt and make a good start afterward. If you don’t want to face debt in the future, start making an emergency fund that includes all your expenses for at least six months.
This will make it stress-free and convenient to surpass such a financial crisis easily.