Poorly managed debt is not something that you want in your life, nor is it necessarily easy to get rid of. But finding your way back to financial independence is a lot less arduous than many people believe.
Follow these 8 steps and you’ll be closer to living the life you’ve always wanted to be able to afford.
- Sort It Out
When it comes to debt, knowing what you owe to who is the first step towards financial freedom. Figure it out, print it off, work out interest rates, prioritise, refinance. Do whatever you need to do to get a clear vision of your debt situation. You won’t be able to forge a successful financial future if you’re always bogged down by a messy financial history. Remember debt can be good but make sure you’re in control, don’t let debt control you. - Out With The Old
You’d be surprised at how much cash you might have lying around your home in items that you haven’t thought about in years, let alone actually worn. That dress you bought for a wedding, those shoes that no longer feel fashionable to you, put them on Ebay and sell them to the highest bidder. You never know who is out there or what they might be willing to pay. It can be daunting at first, but we’ve all got those purchases that lie around collecting dust when they could be collecting us cash. Start small, sell big. - Set Goals
Ariana Huffington didn’t create a media empire by not setting goals. Beyoncé didn’t win 17 Grammys by not setting goals. Lena Dunham didn’t write, direct and star in Girls by not setting goals. And you’re not getting out of debt by not setting goals. $100 extra saved this week, $20 saved when buying birthday gifts, $80 saved by taking lunch to work next week, no matter how small, it all adds up. Having goals is fundamental to achieving a debt-free lifestyle and they should always be realistic, achievable, measurable, and have a deadline. - Save and Substitute
Getting out of debt need not be drab. You can still do the things you like, and enjoy the life you love, but it may take some imaginative rethinking to do so. Create a savings plan to cut back on your current spending and figure out where you can substitute luxury items for less expensive alternatives. Things like pay TV can be replaced by streaming shows online, a girl’s night out can just as easily become a girl’s night in and a group fitness class will do instead of your pricey personal trainer. It may even be best to use an expenses account and allocate a portion of your pay to it. Importantly, you should make a budget and stick to it. - Seek Advice and Listen
When it comes to getting financial advice, there are great alternatives to banks such as private firms and credit unions. Make sure you find someone who is professional and aligns with your vision of your future. Don’t be afraid to ask for a financial planner who you feel comfortable with, as you’ll need to put a lot of trust into their ideas. You can also engage creditors who are more than willing to put in place payment plans, which take the pressure off. The worst thing you can do is not take their calls or not call them back. - Work High To Low
Concentrate all your energy on getting rid of the loan with the highest interest rate first. Put any surplus money into this loan and once repaid, work on the next loan by putting extra funds from the amount you were paying to the first loan into this. Consolidate debts into one where possible and ensure your bills are paid before any further superfluous spending. - Reward Yourself
Make sure you leave some room for the fun stuff. There’s no point in making life so miserable that you ‘break’. Just like a weight loss journey, you need to build in small rewards to celebrate your successes. Different people have different rules; you’re allowed a Mars Bar after a 5km run, you can have a glass on bubbly on Friday if you go to the gym in the morning, you can eat carbs until you’re heart’s content if you swim 50 laps. So what is your financial equivalent? What is your fun-sized chocolate bar reward for paying off that credit card debt? Don’t over do it, but make sure you treat yourself every now and then for achieving your goals. - Have The Right Attitude
Most importantly, choose the right attitude. Poorly managed debt can make life very difficult, but it can’t kill you. It can rob you of your holiday, but it can’t ruin your friendships. How you choose to carry yourself on this journey to a better future is up to you, but you’ll make it easier on yourself if you persevere with a smile and positive attitude.
This article is written in partnership with People’s Choice Credit Union.
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