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get out of debt

Are you desperate to get out of debt? Hopefully these tips will help you with any debt you may have. They are meant to be actionable right now! Let’s get to it…

1. Confirm how much you actually owe

You may owe less than you think, but you also may owe more. Some of us put our heads in the sand when it comes to facing our debt fears, knowing exactly how much we owe (it’s called “ostrich syndrome” – Ostriches in Africa stick their heads in the sand to avoid something scary!) Facing your fear and looking at your statements or calling the relevant establishment for an updated statement is important. Add all the balances up to get one total amount of debt.

 

2. Use the snowball method

This phrase is touted on many websites but it’s not often explained. I believe the phrase was coined by Dave Ramsey. I did read his book and it was really helpful and put a lot of things into perspective. I did not feel as though the steps offered within the book were easily achievable and so I didn’t follow it to the letter. However there were a number of logical tips within the content that made complete sense. By using the “snowball method”, you are putting all your spare money into the smallest debt balance (I know what you’re thinking – “What are you talking about, I don’t have spare money! That’s why I’m reading this article about how to get out of debt!” You will have some spare money when you’ve implemented some of the points below 🙂  )

Once you have paid off the smallest debt, that money which was going to pay the minimum payment, and the excess which came from implementing some of the points below, goes to the next largest debt (i.e. the debt which is now your smallest after paying off the original smallest). And you go on like this until all the debts have been paid off. For example, you have three debts: a credit card sitting at a balance of $5,800, another one sitting at a balance of $3,650 and a loan sitting at a balance of $8,970. With the snowball method, you are paying the minimum payments to both credit cards and the loan, but you are putting any spare cash into the second credit card which has the smallest balance ($3,650). After some time of doing this, the credit card with the smallest balance has been paid off (win!!) and you move on to placing the spare money that was going into that credit card, into the next smallest debt along with the minimum payment (in this case, the credit card with the balance of $5,800). The loan is still receiving the minimum payment each month, but it will only start receiving the spare money after the next credit card has been completely paid off. See why it is called the snowball method?

 

3. Lose habits that do not serve you

The take-away cappuccino on your way to the office, the salad from down the road at lunch time, the chocolate bar from the receptionist who sells snacks (as her side hustle!)… all these purchases add up. Even though it’s just one coffee and you don’t even have a muffin with it, and it’s just a small, cheap chocolate, they really do add up. And you might be thinking that you don’t want to give up those small luxuries that you enjoy. If it’s too hard initially, at least resolve to cut it back to every second day. Maybe spread out your habits, for example, if you buy a cappuccino, you will not buy the lunchtime salad. Cutting back, even just slightly as in this example, will start to add up and will start to make a difference!

 

4. Hustle on!

Remember the receptionist’s side hustle in example 3 above? Well, I don’t think a good side hustle is selling chocolates on your boss’s time, but maybe in some offices, it’s ok. But think more along the lines of the skills that you currently have and moonlighting with those skills on your own time. Or what about using the skills you have and love using but don’t get to implement in your job but think they could be something? Do you love to design websites? Are you a WordPress guru? Do you enjoy knitting anything and everything? Are you skilled with oil paints and canvas? Do your friends always comment on your make-up and tell you that you should teach people how to do it? (This last example is here because I have a friend who does amazing make-up and I ask her all the time if she has considered doing it for people’s weddings or other special occasions. She could make so much side hustle income!) If you are doing a hustle, obviously make sure you research the requirements and check if you need any licenses or if there are any regulations to abide by in your town or country of residence.

 

5. Pay just a small amount more than the minimum payment

Paying even just a few dollars or pounds more than your minimum required payment will make a difference to your overall balance a little quicker than expected. Whittling down that balance with the minimum payment plus a little extra, can also affect your credit score – in a good way.

 

I hope these tips have been helpful for you. If you have any tips that you have used to pay off your debt, I would love to read them… comment below!

 

 

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