How to Get out of Debt Fast Before Becoming a Heavy Debtor
You can get into debt very fast, but the trick is to get out of debt fast before becoming a heavy debtor.
Debt is often like a deep and dark trap.
It is never easy to get out of debt.
Often the ways to get out of debt is like dieting.
You have to be diligent and dedicated.
You need to observe fiscal prudence over an extended period.
Also, you have to pare down your exposure gradually.
Most importantly there has to be a proper game plan.
You need to start getting a handle on your debt situation.
Ways to Get out of Debt Fast
Here is the list of 12 of the best ways to get out of debt:
- Credit Card Concerns
- Calculate Your Exact Debt Liability
- Stop Using the Credit Card
- Decide Not to Borrow
- Negotiate the Interest Rate on Your Credit Card
- Liquidate Your Liabilities
- Make a Budget
- Create an Emergency Fund
- Look for Additional Funding
- Try a Balance Transfer
- How Do You Spend Your Sudden Windfall?
- Don’t Step Away From Discipline
You have to identify the key triggers for debt.
This will help you become debt free fast.
This will help you create comprehensive repayment target.
But remember this is an uphill task.
It is easy to get into it but getting out of debt is complicated.
Many times, people give up in between.
But that’s also because they tend to approach the problem haphazardly.
It is very important to introduce a systematic approach.
That is important when you are exploring how to get out of debt fast.
Credit Card Concerns
One of the biggest problems while dealing with debt is the credit card.
Even before you realize, your credit card debt can snowball to become a monster.
You may be using it for genuine reasons, but the exact amount keeps growing.
Soon a good chunk of your monthly salary goes in repaying this amount.
This also has a domino effect on your other savings.
This is because you do not have sufficient money to save elsewhere.
All your extra funds are directed towards repaying debt.
Additionally, this is a long drawn out process.
So, you tend to keep using the credit card even more than normal.
As a result, the overall debt grows even wider.
Calculate Your Exact Debt Liability
Often this is the first step in to get out of debt fast.
There are still innumerable people who randomly pay outstanding dues every month.
They have no idea about their exact debt liability.
They just keep paying.
The result is you get trapped in a vicious cycle with no sight of any light.
This is exactly why you must first calculate how much debt you owe.
Remember the minimum payment is a mere trap.
Most times, customers fail to do the mathematics.
They don’t realize how much interest cost they are paying.
So once you have the exact debt amount in mind, you can calculate better.
You can segregate your various outstanding and draw up a plan to repay debt.
This is a systematic approach that can help you steadily get your debt under control.
Remember you cannot get out of the debt with a magic wand.
You have to make constant effort to get over the problem.
One of the first steps is this calculation.
This will give you a realistic picture of the interest cost.
That alone will help you make effective plans to rein in your debt.
Stop Using the Credit Card
This is the reason; one of the easiest ways to get out of debt fast is to stop using the credit card.
At least for the time till your debt is repaid, try not to use the credit card.
Remember the more you use it, the higher the outstanding balance is.
So the first step is always about putting a number on it.
This will help in limiting the exact debt liability.
By not using the card, you ensure that it does not increase any further.
You can then plan a repayment strategy.
If you want to get out of debt, this is also a crucial point.
Carefully consider your finances.
Make a realistic assumption of how much money you can spare.
Based on that, you can then create a payment schedule.
It is essential that you pay more than the minimum amount.
This alone can make you debt free faster.
If you continue paying only the minimum amount, it will take a really long time.
The cost of debt also increases significantly in this period.
So, the overall debt liability and the cost of debt increases significantly.
It brings down the interest liability over the longer term.
Decide Not to Borrow
One of the biggest achievements of not using the card is limiting your borrowing.
When you stop using the card, you are making a conscious decision.
You are deciding to limit your debt exposure.
This decidedly means you have to pare down your spending.
Consider the reason why your credit card debt rises.
Often we use the credit card to fund spending that our income does not support.
Now you have to work towards reducing exactly this trend.
Remember, the ultimate repayment is going from your salary.
So, you have to decide not to borrow.
You have to decide to limit your spending.
Your monthly expenses should be in sync with your income.
That means you have to decide to forego certain expenses consciously.
So, for the time being, you may have to do with your old car.
You may have to begin compromising on the brand of clothes you wear.
Remember to get out of debt fast, you need to focus better.
You have to single-mindedly track your own spending trend.
That alone will help you limit the liabilities every month.
The efficiency of your repayment strategy also depends on that most times.
Negotiate the Interest Rate on Your Credit Card
If you ask me, a thorough understanding of your finances is crucial.
This will help you address your debt liabilities way more effectively.
One of the key constituents is the huge interest rate on your debt.
So, it is always advisable to call up the credit card company and get details.
Find out how much interest you are paying every year.
This will help you understand the exact loan amount, the interest part and other charges.
Most credit card companies levy a truckload of charges.
Most times customers tend to ignore it
When you feel that your interest rate is too high, it makes sense to call the card company.
Try and negotiate a lower rate with them.
In this way, you can save some amount of money every month.
Also, it will create better opportunities to improve the credit score.
You can also look to negotiate the various other bills that are levied.
In fact, you can even look to cut down the annual fees.
Remember every dollar saved will help in making you debt free.
Therefore, there is no harm in taking that chance.
Liquidate Your Liabilities
When you are looking at how to get out of debt fast, think of Larry Crowne.
One of the first steps that the protagonist takes is to sell everything he does not need.
He traded his big house for a smaller one.
Then, he sold his car and bought a scooter.
He started shopping at a thrift store.
Well, that is exactly what you need to do to manage your debt.
You have to reduce your spending.
But at the same time, you will need to identify trouble spots.
So if your house mortgage is making a big hole in your overall spending, cut it down.
Simply look for a smaller house.
You can target a bigger house once you can afford it.
In case you feel public transport is cheaper, sell your car.
Remember a car entails significant maintenance cost and also fuel expenses.
If you think that your overall spending can be reduced this way, simply go for it.
The idea is to limit your spending within a budget.
Essentially whatever money is left after paying the debt is your monthly spending.
So you have to do everything to limit the expenses.
That’s the best way to be debt free fast.
Make a Budget
When you are looking at ways to get out of debt, a budget is very important.
Effectively that is your account statement every month.
It carefully calibrates how much income is generated and how much you spend.
This is extremely important.
That alone helps you keep a tab on your plan to repay debt fast.
In fact, a budget can help you in many ways.
It does not just help in repaying the debt but also prevents future liabilities.
Spend in Limit
Once the numbers are staring at your face, it limits extra spending.
The budget reminds you of your monthly liabilities.
So every month you become more conscious of the money in hand.
This will make you be more stringent in paring down your expenses.
You have a fixed amount in mind and you need to spend only that much.
That can go a long way in limiting future debt.
Realistic Account of Liabilities
When you create a budget, you take stock of finances.
You, have your monthly inflow and expense account right in front of you.
So you can make a far more realistic estimate of your liabilities.
When you see the debt amount reducing every month, it gives a different high.
It motivates you to save more and pay off your debt fast.
Most times, you incur debt due to unplanned expenses.
But with a budget, you can easily take care of this problem.
You can include this in your expense plan in your budget.
This will help you make allocations on a monthly basis.
As a result, you will have a much better handle on the future expenses.
Most importantly, it helps you create a leeway even within limited means.
That can go a long way in addressing the problem.
Create an Emergency Fund
This, therefore, brings to the next most important step.
Well, we know a budget helps you to plan your expenses
But to be debt free, you also need to address unplanned expenses.
A sudden sickness or accident can completely derail your finances.
The question is how you can get around this problem.
Well, you need to create an emergency fund to get out of debt fast.
This emergency fund helps you create a kitty to meet sudden expenses.
But the point is you cannot create an emergency fund overnight.
You need to start making small allocations every month.
Take a hard look at your budget and decide how much you can spare.
Now create a recurring deposit or simply a piggy bank at home.
But you have to have a disciplined approach.
Make sure you save this money every month.
Also once you have used this, remember to pay back.
An emergency fund will be of no help if it is not available at your convenience.
So fiscal discipline and fiscal prudence are very important.
You must remember to control your purse strings very tightly.
Most importantly always pay back whatever money you use from this fund.
Look for Additional Funding
Your income amount is fixed, but the debt keeps increasing.
Often this is because the income amount is fixed.
So your ability to meet sudden expenses becomes relatively limited.
As a result, you resort to debt to address all the sudden expenses.
So, an additional source of funding becomes a necessity.
You can use it to create a steady emergency fund or pay your sudden expenses
Well, you can generate this income in many ways.
A part-time job is the most common approach.
This helps you augment your existing salary to a large extent.
But that apart, you can look at many different ways to generate income.
You can undertake online marketing initiatives or start capitalizing your hobby.
You can even put a part of your property on lease to generate the additional capital.
Remember these are all potential ways to get out of debt.
You can use the ones that suit your convenience most.
Primarily it depends on your aptitude and the kind of money you want to earn.
On an average, this is primarily a temporary arrangement.
Most times there is no long-term commitment in these.
It is created principally to pay the debt fast.
Try a Balance Transfer
When you are looking at ways to get out of debt, this is also an option.
You can look at getting a balance transfer.
Many credit card companies don’t even charge anything for it.
Additionally, you can get 0% APR for 12-15 months.
This means you completely save the interest expense in this period.
As a result, it helps you save money and pay the debt fast.
So that becomes like a double advantage for you.
Also, this helps you create a more effective repayment schedule.
Needless to mention that helps you to pare down the debt effectively.
How Do You Spend Your Sudden Windfall?
Through the year, you get many different types of sudden payment.
It can be a large cashback or even an inheritance.
It can even be a regular bonus or an inheritance from your grandparents.
The question is how you spend this amount?
Often, the money gets spent even before you realize it.
But that’s also because your monetary dealings have been haphazard.
But when you create a budget, start making clear allocations.
Use all of this extra money to pay off your outstanding debt.
You will soon realize how every penny can make a difference.
As the principal outstanding starts reducing, it also lowers the interest outgo.
So, it clearly becomes a very effective solution to get out of debt.
Don’t Step Away from Discipline
Financial discipline is the foundation to becoming debt free.
You have to understand that you can make a plan quite easily.
But the challenge is in following it properly.
So in this context, you have to genuinely learn not to yield to temptation.
You have to follow your budget allocations clearly.
If your budget allows you to watch only one movie a month, you have to follow it.
Don’t just yield to temptation and buy expensive jewelry.
First of all, calculate if you can afford it this month.
Or else, it is better to wait and buy when your budget allows.
Fiscal Prudence Is Primary
If you are looking at ways to get out of debt, you need to have a disciplined approach.
This will allow you to make better headway.
It will free up the money required to pay off your debt easily.
The most important fact is to follow a game plan to be debt free.
Also, implementation of your financial plan is as important as creating it.
You cannot plan life, but you can plan your expenses.
Also, don’t live beyond your means. Frugal living and calculated spending are the key.
Create a repayment plan and stick to it.
Often this is the best way to get out of debt fast.