Per CNBC.com, the average American lives with $90,460 in debt. Let that sink in.
Now, depending on your financial situation, you may or may not be living with a similar amount of debt hanging over your head. Many Americans live with a plan or budget that will ultimately lead them towards living debt-free. Sometimes though, life gets in the way of that plan. If you find yourself in more debt than you can handle, it is important to make changes that will ultimately lead you towards a debt-free life.
To help you get a better understanding of what is needed, we’ve put together 5 steps that will help you get out of debt.
1. Start with a plan.
First things first, you’ve got to come up with a plan that is going to work with your lifestyle, while still being effective towards your goal of getting out of debt. BUILD A BUDGET… AND THEN STICK TO IT! (can you tell I am shouting that at my computer right now?). If you need some tips on how to build a strong budget, click over to this budgeting blog that I wrote last year.
2. Where you can, cut expenses.
Take a hard look at your current expenses – hopefully, the budget you built in step 1 will help you do this. Look for categories or purchases that you can eliminate. Start with your recurring expenses (i.e. your monthly Netflix membership), and one-by-one begin to eliminate the charges or subscriptions that you can live without. Remember, for each charge or expense that you fail to eliminate, your path towards living debt-free becomes longer and longer.
3. Cut the bad-habit purchases.
That nice barista that you love to chat with every morning on your way to work, yeah, we are going to have to at least temporarily say goodbye to them. Why? Let me ask you this: how much does your coffee order cost each morning? Let’s say it is $4. If we take that and multiply it by 200 working days a year, that leaves us with a grand total of $800 spent a year on just coffee. Imagine taking $800 off your debt? Jeez, that’d sure be nice.
4. Consider consolidation.
NerdWallet does a great job of describing how consolidation can make a big impact on your journey towards getting out of debt. Debt consolidation is not for all situations, but it can be a great way for you to get out from underneath high credit card interest rates. To find out if a debt consolidation loan is right for you, look at the interest rates that you are currently paying, and then get quoted on a lump-sum personal loan. Once you’ve received your quote, simply compare the interest rates to see if you can pay down debt faster while paying less in total interest over the payment period. If you are considering a personal loan to pay off high-interest credit cards, reach out to a local banker to start your application.
5. Get a side-hustle.
Income is your greatest tool when working to get out of debt. Without a steady stream of income, you are going to sink into debt. But the issue is that many people limit themselves to just one form of income. If 2020 taught us anything, it is that work can be done from almost anywhere. Get online – find out how you can put your skills to work. Have a car? Great, you can start driving for a ride-sharing company. Are you a good writer? Awesome, you can find paid blogging positions all around the internet. Take the initiative and start doing some research. When a new income opportunity arises, pounce on it.
Debt can seem overwhelming, that is for sure. But if you create and follow a strict plan, it is so doable. With a positive mindset and good habits, you will be making big progress before you know it. If you ever have questions or concerns about your current financial situation, please reach out to a Deerwood banker. No matter where you are at in your journey, we want to help you work towards your financial goals.
P.S. Step 6: Go watch Dave Ramsey videos. He’ll kick your butt into action!