Are you drowning in debt and looking for a way to get out of debt fast? You are not alone.
I reckon drowning in debt leaves people with one of the worst feelings ever. Reasonable people with a conscience at least. I liken it to having a noose around your neck which gets tighter and tighter with each passing moment, and this dramatic but important visual has been very helpful in making me steer clear of debt.
Sadly, the proportion of persons walking around with bad debt profiles is alarming. If you are one of them, this piece isn’t to call you out. It’s to help address the problem that would let you sleep better at night. Having conversations with folks of whom some are friends, made me realise this is such an important topic to delve into.
Anyone who borrows money from another person/organisation with a mutual agreement to pay it back is in debt. ‘Bad debt’ is a debt that is used to pay for something that doesn’t generate income or loses value. Most personal debts fall into this category. It’s as simple as this: The less debt you have the better. Not just for your finances but for your physical, mental and social well-being as well.
So How Do I Get Out Of Debt?
The juice you’ve been waiting to get. Debt management is crucial for the borrower and has different approaches. The general idea is to progressively lessen how much you owe until you can eliminate the whole amount. Here are 3 good steps to guide you.
STEP 1 – KNOW EXACTLY WHAT YOU ARE DEALING WITH
Ignoring your debt doesn’t make it go away. Make a comprehensive list of all your debts; Creditors’ names, total amounts owed (plus interest rates if applicable), when each loan was taken, and the repayment terms including due dates .
This step is important and gives the complete picture of your situation. It also helps you track and adjust the numbers as you pay up what you owe. You should have this documented in more than one medium so you never lose it.
STEP 2 – FACE THE PEOPLE YOU WANT TO GET OUT OF DEBT WITH
You need to be brave and face your creditors. Sincerely apologise if you’ve defaulted and re-negotiate the terms where you can. This is the step many people sign up for the witness protection program to avoid altogether and it’s not right. There’s little more upsetting than a man who proves to be without honour, does not keep to his word, and spits on the hand that helped him. Do not be that man. Rather be a Lannister and always pay your debts.
STEP 3 – MAP OUT THE PLAN THAT HELPS YOU GET OUT OF DEBT
Decide how to go about repaying the debt. If you’ve never used a budget before, now is a great time to initiate one and make room for debt repayments in it based on your inflow. Look through your list and prioritise who should be paid before who.
You could pay off the smaller amounts which are easier to clear off first (Snowball method) or handle the bigger payments with higher interest rates first (Avalanche method). Since all these payments are based on your cash flow, having a plan B, C and D which doesn’t involve more borrowing is critical. Here are a few ways to increase the amount besides your regular earnings.
1) Cut down your expenses
This is the time to be frugal and live way under your means. Forgoing certain wants like eating out, entertainment, and leisure travel and using every saved penny to clear your debt would serve you well.
2) Sell off items you can do without
Declutter your house and sell off unused and underutilised items. You could also trade in some expensive items like your car for a more affordable option and raise some money to repay your debt in the process.
3) Lease/Rent out your items
You might be surprised by the things you can rent out to make some extra money that gets you out of debt. From kitchen items to gadgets, you can make good money from what you already own.
4) Get an extra hustle
Getting an extra job or side hustle where possible would help you boost your income and handle your debt faster!
5) Channel windfalls towards debt repayment
It is mighty tempting to use unexpected money you’ve been blessed with splurging on wants but, if you get a windfall of any kind, use it to clear debts.
In conclusion
Be very disciplined and committed to repaying your debt as soon as possible. You’d feel better about yourself as you make progress.
If you want to get out of debt, you have to stop digging. Do not borrow from Peter to pay Paul
One last thing here
There is one secret sauce and very important aspect to making sure you execute your plan to a tee and that’s accountability. For anyone of this to really work, you should become accountable to someone else who wouldn’t be so lenient and allow you to veer off course. As a financial coach, I can be that for you. If you want this assistance (and you should), send me a message by clicking HERE.