How to Get Out Of Bad Debt.
If you want to get out of bad debt on your own and fast, this is the article that will help you do it. Not someday. Not tomorrow. Right freaking Now!
Creating your own get out of debt plan is truly possible. With some fundamental changes to your lifestyle, you can get out of debt fast even with a low income. However, turning around your financial situation doesn't happen without some work. It requires commitment, planning and strong self-discipline. But luckily, it gets easier over time as you build better spending habits.
The following are some of the best ways you can use to eliminate your personal debt. If you implement them, they will work.
#1. Stop borrowing
The first and most important step in getting out of debt is to stop borrowing money. No more swiping credit cards, no more loans, no more new debt. Reshaping your attitude toward money and debt is the most fundamental change that has to happen. In order to avoid digging yourself into a bigger hole of debt, you have to understand the true cost of swiping a credit card and taking out new loans. Resolve to live on a cash basis while you make your changes. Don't worry about debt consolidation or balance transfers at this point - you're still in the early stages. You don't want to trade one kind of debt for another until you understand your situation and have a plan.
#2. Set up a budget and a goal
Creating a budget can be daunting, but just as difficult as the day you finally step into the gym, the rewards are immense. It will not only let you know where your money is going but it can also help you curb unnecessary expenses. Like a budget, having massive debt can be equally overwhelming. You can list your debts from small to big then start by including the least in your budget while paying one by one. Most people focus on paying the bigger debts. Even short-term goals like paying your 1000ksh debt is a start. When you start reaching these little goals it becomes addictive in a very positive way.
#3. Keep it rolling
Once the first loan or debt is paid off, apply the total amount you were paying each month on that loan to your next debt. You are now paying the minimum amount due on the second debt plus the total monthly payment you paying on your first debt. Continue this process with all your debts and other consumer credit debt. With each debt you pay off apply the full amount you were paying on that debt to the minimum payment of your next debt. As you pay off each debt, the monthly amount you are paying on the next debt will escalate.
#4. Track your spending
The next step is to figure out where your money is going. It can be difficult deciding where to make budget cuts without having a full picture of what you pay for and how you spend. It's best to track all of your monthly bills for at least a month as well as daily spending. Don't forget to include your debt payment obligations while tracking.
#5. Make more, spend less
Look at your monthly expenses and see if you can increase your income to cover your deficit. Think about getting in some more hours at work or even a part-time job to cover those few hundred dollars that often leave you in the red. If you could earn extra income that will make up that difference and you can start going in the right direction.
#6. Build your wealth
Now that you are completely debt free, take the monthly amount you were paying on your last debt and put that money toward investments. Build your asset column even using good debt.
Final Thoughts...
Contrary to popular belief, debt is not something to be afraid of. Rather, it is a powerful tool to build wealth when used correctly.
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