The sad reality is that most families live under a sea of debt and find it very difficult to get out. You might be tied down to a mortgage, car payments, credit cards and other loans that are truly taking a toll on your financial well-being. Thankfully, there are ways for you to begin eliminating debt so that you can reclaim your finances to get your life back on track.
Use the Snowball Effect
The snowball effect or method is a well-known strategy to help eliminate debts and dues in a shorter period of time. You will first want to focus on eliminating your smallest amount of debt, like a credit card or loan. Take the minimum payment of one account, increase monthly until the balance is paid in full and then put the entire amount you put towards the first account towards a second plus its minimum due. This causes a snowball effect to occur, which can get those bills paid off quickly and effectively.
Start Saving Up Money
You need to start saving up money as often as you possibly can. One of the major benefits to saving money is that it’ll prevent the need to use loans and credit cards if an emergency comes up in the future. Let’s say that your refrigerator stops working and needs to be replaced immediately, rather than use a credit card or taking out a personal loan, you simply dip into your savings and then work to replace that money with each upcoming paycheck.
Look for Special Debt Relief Programs and Consolidation
There are many relief programs specific to individuals who owe a significant amount of money to lenders and creditors. For instance, the Parent PLUS loan forgiveness option is ideal for parents who have student loans that they need to pay off. Likewise, you might want to think about consolidating several accounts into one lump sum. This can reduce high interest rates and confusing bills that could result in penalties and fees.
Stop the Overspending
Overspending is a common problem that many individuals and families face. Spending too much doesn’t always have to mean going to a local boutique and splurging on anything you can possibly buy. It could be as simple as eating out too much, buying name brand products rather than store brand options or putting too much money towards the upkeep of your hair and nails each month. By cutting down on the amount that you spend, you’ll have more funds available that can either be saved or put towards existing debts.
Plan for the Future
Life isn’t always easy and major events can happen at virtually any time. Your plumbing suddenly goes and needs to be fully replaced, you owe more in taxes one year because of the sale of a property or you or a loved one gets sick without medical coverage. Planning for the future is an important way to prevent debt from happening. Planning may involve working with a financial advisor, investing into solid options and saving up as often and as much as you can.