If you’re drowning in debt, you’re not alone. Hundreds of thousands of people nationwide are buried in debt just like you. Recovering your debt may seem impossible, but the right plan can help you achieve the financial freedom you deserve. Whether you’re paying off a student loan or you need tax resolution services, you can pay off your debt and create a better financial future by following these tips.
Keep a Positive Attitude
It’s easier said than done, but you can’t tackle your debt if you don’t believe you can do it. Financial stress is a major cause of anxiety and depression, but you can get through it with the help of family and friends. Build a supportive network of family and friends you can trust. Choose people with good listening skills, patience, warmth, and empathy. If you need more help, find a therapist who specializes in financial stress. It may be an investment, but therapy can help you come out of debt as a stronger individual.
List Your Debt
If thinking about your debt causes you anxiety, the best way to handle it is to face it head-on. You can gain power over your debt by writing it down. This simple act demonstrates courage and makes people feel like they have more control over their circumstances.
There are two ways to list your debt. The method is called the “debt snowball.” This method involves paying your smallest debts first to create momentum to inspire you to keep going. This strategy gives you more confidence to move forward by making your debt appear more manageable and less intimidating as you go. As you whittle away at your smaller debts, you diminish your minimum monthly payments, so you can dedicate more moneyto larger balances.
The second method is the “debt avalanche.” This method includes paying your balances with the highest interest rates first. This plan is more practical and the goal is to be the cheapest and most efficient way to get out of debt.
High interest rates can cost you, especially high rates on loans that take longer to pay off. As interest accrues, it gets added to your total balance, so you’ll be charged even more. Paying your highest interest rate first saves you more money. Depending on the details of your debt and personal finances, the snowball method can cost you thousands of dollars over time. If saving money is your primary motivation, choose the avalanche strategy.
Cut Frivolous Spending
It’s time to say goodbye to the Starbucks pumpkin spice lattes for a while and start making your own brew at home. Those little costs add up, and before you know it, your paycheck will vanish. Need a new pair of jeans? Forego the glamorous brand names and shop sales at your local Target. Skip the weekly happy hours, limit your dinner outings, and focus on the goals ahead.
You can motivate yourself by giving yourself a reward. Each month, allow yourself a treat for making your payments on time. This can include a night out with friends, a new blouse you’ve had your eye on, or a day of pampering.
Stick to a Budget
Once you cut the fat of your spending, you’re left with the bare essentials. Create a budget online with a service like Mint, or consult a finance professional who can make a budget for you. If you have peers who’ve freed themselves from debt, ask them how they did it. Explore different options and find one that works for you. This is a crucial step for those dealing with tax debt; whether you’ve been hit with levies or need to create an instalment payment plan with the IRS, getting tax resolution and tax levy helpcan help you get out of debt with the government agency sooner.
Restrict Your Credit
Be wary of your credit during this time. Credit bills creep up, and if you don’t keep your balance low, your interest rates will drive up the cost. If you aren’t already in substantial credit debt, keep spending to a minimum. Build your credit using a basic credit card with a low interest rate. Even if it has a low credit limit, you can restrict your spending to predictable expenses like gas and groceries. When you get out of debt, you’ll also have enough credit to invest in larger purchases.
Paying off debt can be difficult, but you can keep your finances in control by following these tips.