Most young adults deal with debt related problems. If you’re one of them or know of one, then read or share this post with them to learn how to get out of debt!
You should make it a primary motive to get out of debt. Life can be difficult and it only gets tougher when your confronted with debt.
This article is designed to help you become debt free if you’re a young adult. Someone who is about to have a family or who has just started to make their own living and feel pressured due to debts!
Debts are really troublesome, probably the most important factor is the interest that comes with it. At the end of the day, you end up paying more than what you owe.
So here I’ll discuss how you can pay off your debts really fast, and not incur more of it in the future.
Have you Started Budgeting?
You cannot fight debts without the help of a proper budget!
For every financial purpose there has to be a budget. Be it for a nation’s income and spending or you who wants to get out of debt fast!
Whatever is the case, a good budget is your key to a debt free life.
As a financial advisor, I always suggest backward budgeting. It’s professional and highly effective.
How does Backward Budgeting Works?
This technique is primarily used to build savings. You set aside your desired monthly savings amount from your paycheck, then with the remainder you pay your expenses.
But in your case, the first concern is paying off debts. You should first calculate and see what is your total monthly debt payment.
Then set aside that amount every time you get your paycheck!
Now once your debt headache is cleared for the month, you can easily use the leftover lump sum amount for your living and household expenses.
Here are the top three tips for budgeting:
1. Discretionary Expenses
Try to reduce your discretionary expenses, like transportation, electricity, groceries, etc. Remember in paying off debts, even a extra penny counts.
2. Savings
Along with paying down your debt escapade have savings in your mind. Building savings will give you more financial freedom in the long run. That’s what happiness is!
Stick to your budget and stay positive. In the meantime don’t use credit cards or take out other forms of credit!
3. Debt Settlement?
As I discussed earlier, you should calculate how much your monthly debt payment is.
Probably budgeting alone won’t help you much, as your income probably is adequate to service your debts.
So I would suggest you to try out debt settlement. You should get the help of a reputable financial advisor and see how debt settlement can help you to lower your debt amounts significantly.
There are chances with a settlement you can clear your debt amounts by only paying a portion of the money you owe. The rest due amount will be forgiven.
Of course a settlement can lower your credit score! Look out for that!
More Techniques to Get Out of Debt
1. Debt Snowball
For positive motivation use debt snowball as a debt payoff strategy. Debt snowball helps you get rid of the lowest amount of debt first, which will encourage you to move on to the next debt.
Here you target the lowest debt amount, and start doing extra payments against it. Once you clear this debt, you target the next debt.
The method works a bit like this, say you have three debts.
1st Debt = $1000 (minimum monthly payment is $100),
2nd Debt = $1500 (minimum monthly payment is $150), and
3rd Debt = $2000 (minimum monthly payment is $200).
What you do is, add an extra $50 payment to Debt 1. Your payment is now $150 for Debt 1.
Once you clear this, you add the previous payment for Debt 1 to Debt 2. The payment for Debt 2 becomes $300. You carry on like this unless you clear all your debts.
2. Debt Avalanche
The Debt Avalanche will help you clear the debt with the highest interest rate first. You start making extra payments on the highest rate debt and clear it first.
Unlike Debt Snowball, depending on the size of the debt it may take time to get rid of your first debt. However, when you finally erase the debt with the highest interest rate, your level of satisfaction will be more than Debt Snowball.
3. Student Loans
Look into whether you can qualify for a student loan cancellation or forgiveness. Student loans are actually tough to deal with.
So approach your student loan lender, to review the various options you have to cut down this big burden.
4. Financial Counseling
Don’t hesitate to get financial counseling. There are times when frustration eats at you if you can’t clear your debts.
If you think, that no budgeting or debt payoff strategy is helping, then seek debt help advice, from a reputed financial consultant or a good financial advisor.
All the best for a bright and debt free future!
Do you have any strategies for dealing with debt? Please share them in the Comments. Thank you.
