When money problems start to spiral out of control, it can be really hard to see a way out. The sooner you start to address the problems, the less it might cost you, though. Debt can cause greater debt. That doesn’t mean it’s impossible to turn your finances around and start to enjoy having spare cash at the end of the month. It just takes some tenacity and time.
Start by detailing exactly what you owe each creditor. You might have credit cards, overdrafts, and personal loans for home improvements outstanding. It’s likely you have minimum payment agreements each month. How much are they, and how many more do you need to make? This gives you your current time scale for clearing them. Can you speed things up?
To find out if you’re able to clear these debts a bit quicker, you need to find out exactly how much money you can put toward them. What is your total income right now? What is your budget for energy bills, groceries, going out, etc.? If you don’t have a clearly defined budget, it could be worth putting one together. There are plenty of great templates or spreadsheets to help you commit to a maximum spend each month.
Take some time to analyze your receipts. Where is your money going and can it be reined in? Swap coffees at the cart for home brews in a thermos. Sandwiches made at home are cheaper than burgers from the street vendor. Buying only the clothes that need replacing can also be a frugal approach to your household budgeting. Where else can you make savings?
So far, you’ve probably spent at least a couple of hours figuring out where your money is going. Now you need to detail where you want it to go. You know what you should be paying on your current loans and debts. If you don’t earn enough, consider asking for a pay rise, or taking on some extra work. If you have a good income, consider clearing these debts quickly. This reduces the amount of interest you’ll have to pay, making the debt cheaper. Some loans are fixed term, so check there is no penalty for paying it back early.
Once you’ve made your final payment, you may be wondering what to spend all that spare cash on. To avoid debts again, consider starting up a savings account or two. You can apply for high interest deposit accounts easily online that will help grow your cash for that next big purchase. It’s handy to have some cash in the bank should you have an emergency at home, or an excess to pay on a medical bill. Next time you consider borrowing cash, remember what it took to clear all those debts!
Frugal living and repaying loans early can help you become debt free more quickly. Once you’ve cleared what you owe, you have the freedom to save up for whatever you might fancy in the future. It also buys you the financial security you were in danger of losing thanks to the debts. What will you save for?