Nobody likes the situation of being in debt. It is simply one of those things that you feel it’s out of your control, or happen unnoticed. However, there are things you can do to get out of debt, you may ask how long does a debt management plan last? And even though they may take time, you will avoid getting trapped into the debt hole. Here are some of the strategies you can start implementing today.
1. Have an Emergency Fund
Emergency situations are unavoidable and unpredictable. Unfortunately, many people don’t have emergency funds that can help them when they find themselves in a car accident, a plumbing issue, or a medical situation. So, consider having an emergency fund account with savings of at least 6-months. This will help you have something to turn to when you even lose that job or an injury prevents you from working.
2. If You Cannot Buy it With a Credit Card, Do Not Buy It
One of the saddest things about having a credit card is that most people get into the illusion that they can buy things they can’t afford. A good rule to follow is that if you cannot afford to purchase it with cash, then you cannot afford it with a credit card. So, if you don’t want to get into debt, do not buy something you cannot afford with your own cash.
3. Focus on the Needs, Eliminate the Wants
If you find yourself in debt, then there is room in your monthly budget to get rid of unnecessary spending habits. So rather than that ‘Taco Tuesday’ every week, move it to once a month. Reduce your online spending habits, take homemade lunches, and cut back on going to the cinema every week. There more you shave, the more money you will have to clear your debts or invest in other practical things.
4. Have a Practical Budget
One of the best ways to clear or avoid getting into debt is by having a practical budget. By budgeting your weekly or monthly expenses, you will be in a better position to track where your finances are going and where you can better spend them. On a monthly basis, figure out how much to put towards savings, retirement account and how much extra you have to spend on essentials. So, if there ever comes a time where you need to do a substantial cut-back on expenses, you’ll know exactly what to eliminate. Handy tools like Money Manager will come in handy for such organization.
5. Pay Off the Credit Card Balances in Full
Another way to keep your spending habits under control is by paying your credit card balances as you go. For instance, when you buy something with the card to earn rewards, make the payment as soon as possible before other things in your life get in the way.
6. Avoid Using Credit Cards for Cash Advances
If you use your credit card to get cash at hand, chances are you’re abusing your finances. The APR is not only higher compared to conventional purchases, but you will be charged a fee as well.
7. Limit the Number of Credit Cards
Having multiple credit cards means making multiple payments and several situations tacked on interest. This is nothing but a setup for the ultimate need to consolidate your debt if you are unable to use the cards in a responsible manner. The more charges accumulated on each credit card is a quick way to get into debt.
8. Keep Track of Your Expenses
Consider keeping track of your expenses on a master sheet that you can update on a monthly basis. This way, even if you have multiple cards or accounts, you will keep track of everything and be able to make full payments on time. A tool like Money Manager should help you gain a full picture of your finances, including credit cards, loans, accounts, investment accounts, savings accounts, etc.
9. In Case of Salary Increase
If there comes a time where you get a pay rise, continue with the lifestyle you have before and put the extra money in savings. After all, you have managed to make it this far. So, be wise and put that money where it will work for you and create a better future.
10. Embrace autopay
Late payments on any account, including loans and utility bills, lowers your credit score and could result in fines as well.
11. When you can, pay more
This does not imply each month. But, when you have extra money, think about paying down debt with it. Think new debt through carefully. In a year, five years, or ten years, what are your plans? Your overall financial objectives will be impacted by the debt responsibilities you take on today. (Five important debt management queries can be useful.)
12. Streamline your debt
If you can combine your debt on better terms, it might be helpful if you have high interest debt. But carefully read the fine print to avoid being surprised with costs or penalties you weren’t expecting.
Your key result areas…
- Low credit ratings might result from high debt levels, which can make it more challenging to get financial goods.
- Think about paying off your smallest debt or paying off your credit cards with the highest interest rates first.
- Consider methods to cut costs and use the money you save to your debt.
- Programs for loan forgiveness and income-based repayment can help with college debt.
- Talk to a qualified credit counselor about your alternatives based on your circumstances.
Being debt-free is wonderful. Yet it’s not realistic for most individuals. Few people, for instance, have the funds necessary to pay for a home or a college degree.
Yet not all debt is harmful. Two strategies for managing debt and fostering a good credit history are paying your bills on time and making minimum monthly payments on your credit card balances. As a result, you might be able to get a loan with a cheaper interest rate or have your credit score raised.
With these tips, you should be able to manage your finances better and avoid being stuck in debt.