It’s important not to run away from your debt or to hide it from your loved ones! Tackling your financial insecurities head on may seem intimidating, but it is the only true way to get a handle on your problems.
Below, we will discuss some ways you can effectively deal with your debt when it gets out of hand.
Try To Cutback On Spending
It goes without saying that the most financially responsible and feasible way to deal with your debt is to cut down on spending.
It’s best to physically keep track of what you spend your money on every month as it will give you a much clearer idea about your problem areas.
The idea is to lower the cost of your non-essential items. For example, instead of eating out, why not prepare your own meals?
Consider cancelling your gym membership in favor of exercising at home or riding public transport as opposed to opting for rideshare services.
You can even look at better deals for the debt you currently have, as this can save money too.
If you have a mortgage, for example, you could remortgage and pay less per month.
This could even be possible with bad credit and you can use this calculator to get an idea of the figures.
The money you save by cutting back is funding that you can use to clear away your debt.
How To Create A Reliable Budget
In order to escape the debt you’ve racked up, you will need to get a solid idea of where your money actually goes. First and foremost, make note of all of your monthly income.
This should include money you earn from your paycheck and as well as benefits you may get from welfare or child support.
Once you have a solid idea of your income, write down all of your expenditures. The first things you should note are the essentials that include your food, utilities, mortgage, car payments, and anything else.
The other non-essential items should make the list as well as they are considered luxuries at this point.
It’s important to have an idea of how much of your income you have outgoing on essential items. The thought behind this exercise is to find out how much money you spend on non-essentials that may be better put to use paying off your debt.
This will also give you a harsh dose of reality because it’s often surprising how much the little things you spend on can add up.
Make A List Of Priorities
It’s crucial at this point to prioritize your expenses and pay your most important bills first such as your mortgage, tax, and secured loans.
Once you establish that you can and have paid off everything to keep a roof over your head, it’s time to keep going. If you need help with your debt find out how does a debt management plan work.
Next in line is anything to do with your utility bills, food, and unsecured loans. Lastly, luxury spending that includes streaming services, shopping excursions, and eating out.
It is crucial to pay your bills on time with what little money you have. Any days you miss payment will eventually land you further into debt as most banks rack up fees.
Of course, there’s always the possibility that you’re unable to pay your bills on time or at all. If this is the case, make sure you let your lender know as they may be willing to negotiate payments with you.
Luciana joined our team as a mum blogger in 2020. A dedicated mum to a lively daughter and a dog, Luna, Luciana brings authenticity and passion to every post. Her expertise in parenting and lifestyle topics offers practical, relatable advice for real-life situations.