The majority of us have some sort of debt to our name. Whether it’s a credit card, a loan, or maybe you just owe a loved one a little bit of cash that they gave you when times got hard.
Regardless of your type of debt, it’s important that you create an active plan to clear it. Money borrowed from professional lenders accrues interest over time, so you will end up forking out a lot more than you initially borrowed in order to clear your account.
Money borrowed from loved ones can put a strain on your relationship, resulting in arguments. Regardless of your means of borrowing, being in debt can also cause stress which is negative to your overall health, happiness, and well-being. So, it’s time to get out of the red and into the black! Here are a few steps that can help you to achieve this!
Determine Whether Bankruptcy is Reasonable
Of course, the fastest way to get out of debt is to go bankrupt. When you file for bankruptcy, you pay a small sum of cash in order to have all of your debts cleared immediately.
You will no longer need to pay back any of the money that you owe. However, you do need to determine whether going bankrupt is the best way for you to get out of debt or not before going ahead with the process. Why? Well, when you go bankrupt, you have to forgo any savings or other assets that you might have at the time of going bankrupt.
You also won’t be able to hold a bank account or take out credit for a significant period of time. If you have huge debts that you could not possibly ever afford to repay, this is the route to take. If you only have small debts, you might want to consider going about things a different way.
When you are in debt, you still have to pay for life’s essentials. So, you need to create a budget to actively clear your debts without facing problems in other areas of your finances. Take note of your monthly pay after tax.
Next, deduct essentials, such as your rent or mortgage payments, energy bill payments, and grocery shopping. The figure that you are left with is your disposable income. When you have debt, you should dedicate as much of this disposable income as possible towards clearing your debts.
The more you clear on a monthly basis, the sooner your debts will be gone. So, commit to the cause, deny yourself luxuries and non-essential purchases, and really hammer away at your outstanding debts.
These are just a couple of steps that you may want to consider incorporating into your financial plan when you find yourself owing money out to others. Hopefully, they will help you to get back on your feet as soon as possible!