Living off of credit has become a necessary evil. It can be the only way out of unfortunate events, such as a sudden job loss or serious illness. This can have a knock-on effect and lead to living from paycheck to paycheck, battling to make ends meet.
It may not seem like it at the time, but there are easy steps to becoming debt-free. It all starts with examining your finances. It’s not all doom and gloom! If you can see where you’re spending money and where you may be able to save, you can trim your debt down in no time.
High Interest First
You may look at your finances and consider paying the debt with the highest balance off first. Instead, look at which of your debt has the highest interest. If you prioritise paying off the debt with the highest interest first, then you can redirect more funds towards your other debt.
By paying off your accounts that accrue interest, you’ll save money in the long run. The longer you let this debt continue, the more interest builds up, so it’s wise to get this out of the way first.
Consolidation Loans
One option to consider is applying for a debt consolidation loan, which means you can pay off your accounts while borrowing money at a lower interest rate. You’ll also have fewer payments to make at the end of the month, as you’ll end up with only one payment at the end of the month - the loan.
With your debts paid off, you can look at paying extra on your monthly repayments, which will help you save money on the interest in the long run. You may not see your credit score improve within the first few months after paying your debt off. But by the fourth month, when all information has been updated and passed on to credit bureaus, you’ll see that your score has improved.
Prioritise Spending
You may be shocked at how much you spend on things like buying lunch every day. It takes some discipline, but when you start looking at what you need versus what you want, you'll see how much you could be saving.
It won’t be a lifelong sacrifice, and there are money saving applications that can help you put a budget together and keep your spending activities on track.
Go Big
When paying monthly installments, pay extra towards the account with the highest interest rate. Once that’s paid off, do the same with the next loan.
If you want to eat an elephant, you have to do it one bite at a time! It’s the same approach with your debt. Tackle it one debt at a time, paying off the highest interest and working down to the accounts with the lowest interest.
Keep Track
Keep track of what you actually spend on a monthly basis (this includes things like the chocolate bar you bought yourself as a treat). Also keep track of what you’ve paid towards your monthly installments. This will identify two important things:
• Your spending behaviour.
• What you’re spending on.
You may also find areas where you can cut back on spending. All extra cash that you free up must go towards paying off your debts.
Conclusion
It’s always a good idea to pay your debt off as quickly as possible. We understand that sometimes this may seem like an impossible task.
But debt doesn’t have to feel like a jail sentence! Reach out and check your options here. Friendly Finance is here to help you find the best financial solution.
