Contrary to popular belief, there is no such thing as good debt. When you sign a loan contract, you put your family’s financial future at risk. There is nothing good about signing away your future.
Solutions to Your Debt Woes
Whether your debt load is hundreds or thousands of dollars, it is a good idea to develop a debt exit strategy. These 5 steps to quickly eliminate your debt will guide you as you travel on the path to financial freedom.
1. Assess Your Current Debt Load
Breaking the chains of financial bondage is like losing weight. Before you embark on either journey, you must assess your current situation.
How much money do you currently owe? What are the interest rates on the debt? If you pay the minimum amount on your debt, how long will it take for you to repay the debt?
If you are unsure about the answers to these questions, it is time to assess your debt. Make a list of every financial institution, family member or friend that you owe. Include the total amount due, interest rates and minimum monthly payments.
2. Start a Side Hustle
Chances are your current salary may not be enough to repay your debts quickly. The only solution to a cash flow problem is to earn extra cash with a side hustle.
A side hustle can be a part-time job, business pursuit or any (legal) means to garner additional income. Here are a few side hustle ideas to get you started.
- Create an account with Airbnb and rent your spare bedroom.
- Start a tutoring business.
- Write and sell articles online.
- Sell items that you no longer need on Craigslist, Offer Up or eBay.
- Drive for a rideshare service such as Uber, Lyft or Sidecar.
- Start a dog walking service.
- Deliver packages in your area for Amazon Prime.
Getting an additional job will eliminate your leisure time. Just remember that it is only for a short period, and the benefits will be worth the effort.
3. Start an Emergency Fund
On your journey to financial wellness, you will encounter triumphs as well as setbacks. One way you can plan for challenges is by establishing an emergency fund.
The last thing you want to do is borrow additional money to finance an unexpected expense such as a car repair, leaky roof, plumbing problems or dental expense. An emergency fund of $1,000 is enough to take care of these problems.
After you have set aside an emergency fund, you must be disciplined and focused. Use the money for legitimate emergency expenses. A broken tooth is an emergency. A good deal on a trip to Barbados is not a necessity.
This may seem like a no-brainer, but getting out of debt can be a tedious process. Knowing the pitfalls before you get started can prevent you from buckling under pressure.
4. Alter Your Spending Habits
No matter how much money you make, you will always be in debt if you continue to spend more than you make. It’s just simple math.
Taking an honest assessment of the way you spend money is half the debt battle. Modifying your spending habits is easier than you think.
. Become your own barista. Purchase an inexpensive coffee maker, cute coffee cup and ingredients to make your daily cup of coffee at home. Your cost of brewing a cup of coffee at home is less than 20 cents per cup.
. Extend the time between your salon services. If you go to the salon every week, start a new habit of going every two weeks.
. Nix the designer duds. Do you really need to spend $300 on sunglasses or $600 on a pair of shoes?
Fun fact: Bill Gates (net worth $85.7 billion) has been photographed wearing a $10 watch. There is clearly a difference between looking rich and being rich.
Emancipating yourself from the shackles of debt requires drastic actions. What are you willing to give up to reach your financial goals?
5. Get Angry About Being in Debt
The truth is being in debt is eating away at your future. While you are asleep at night, the interest on your debt is accruing.
Instead of making friends with debt, you should get mad and make debt your enemy. Think about the effect debt is having on your life.
- Are you stuck in a job that you hate because you have loans to repay?
- How much money would you have in your savings account if you were debt free?
- Does your debt cause you to feel anxious or stressed?
Debt is not your friend, and it is time for you to release the grip it has on you. By following these simple solutions, you can eliminate your debt.