Getting out of debt is possible if you make a good “get-out-of-debt” plan and strategy and stick to it. It can be hard to keep up with your monthly bills, student loans, and personal loans, let alone pay the monthly payments on your credit card.
Luckily there are plenty of ways to get out of debt. Making your own step by step plan is possible with some fundamental changes to your lifestyle, you can become debt-free.
However, turning around your financial situation doesn’t happen without some work. It requires commitment, planning, and strong self-discipline. But it will get easier over time as you build a repayment plan and realistic budget.
Call IVA Advice for professional free debt advice today and get the right advice on how to become debt-free.
Here are 10 tips to become debt-free
1. Stop borrowing money
The first and most important step in getting out of debt is to stop borrowing money. No more swiping credit cards, no more loans, no more new debt.
Reconsidering your attitude toward money and debt is the most fundamental change that has to happen. In order to avoid digging yourself into a bigger hole of debt, you have to understand the true cost of swiping a credit card and taking out new loans. Strive to live on a cash basis while you make your changes. Don’t worry about debt consolidation or balance transfers at this point – you’re still in the early stages. You don’t want to trade one kind of debt for another until you understand your situation and have a plan.
IVA Advice can give you professional guidance and support with a debt management plan.
2. Track your spending
The next step in getting rid of debt quickly is to figure out where your money is going. It can be difficult deciding where to make budget cuts without having a full picture of what you pay for and how you spend.
It’s best to track all of your monthly bills for at least a month as well as daily spending. Don’t forget to include your debt payment obligations while tracking.
There are a number of ways to track your money. Some of the most common ways include:
- Use a budget worksheet
- Keep notes in a notebook
- Use a free money management app
- Use banking app trackers
- Keep receipts
Whatever method you choose, make sure it is one you will remember to use every day and will help you get a full picture of just how much money you spend.
3. Set up a budget
Once you’ve tracked your spending, it’s time to create a budget. By using your regular spending as a guide, this budget should account for all of your needs.
The tracking will also show you places to cut spending. You’ll be able to see where you’re spending too much and where you can easily make cuts without deeply affecting your life. Of course, you may also find places that need changes that you may not want to make. It’s important to find a balance between livability and a strict budget to get out of debt.
A vital part of the budgeting process is to put it in writing. It’s not enough to mentally plan how much you’re going to spend – it has to be recorded in concrete form.
It’s also important to include financial goals in your budget. Writing your goals down makes you 42% more likely to achieve them. Make getting out of debt your first priority, after your debts are paid off, you can come up with more goals to save money.
4. Create a plan
Now that your spending has been tracked and your budget created, it’s time to implement a payoff strategy and pay off that personal loan or multiple student loans.
One of the quickest ways to get rid of debt fast is by using the 'Debt snowball' approach, also known as the 'Debt avalanche' approach. This strategy calls for you to make minimum credit card payments from your monthly debt payment fund to all but one of your debts. This specific debt will get more than the monthly required amount and will be paid off quicker as a result.
When that debt is paid off, you choose another debt and reallocate all of the extra funds toward it. Keep repeating this process until all debts are repaid in full. Over time, the extra funds snowball, while the amount of money you dedicate to debt repayment stays the same.
This method accelerates your repayment faster as debts get paid off. When trying to decide which debts to pay off first, you can sometimes focus on paying the debt with the highest interest rate first.
5. Pay more than the minimum monthly payment
If you’re trying to figure out how to get out of debt quickly you should try to put as much as you can toward debts every month. Remember the 'debt snowball' method – every chance you have to make higher payments will bring you closer to being debt-free.
When you create your initial budget, set a minimum amount that you are putting toward debts each month. This should be around 20% of your total income. Of course, any opportunity to add more will help get you to your goals faster.
No matter what your situation, it’s important to pay more than the minimum required. Make this a habit.
6. Consider a Debt Consolidation loan
A Debt consolidation loan refers to the act of taking out a new loan to pay off other liabilities and consumer debts. Multiple debts are combined into a single, larger debt, such as a loan, usually with more favourable payoff terms—a lower interest rate, lower monthly payment, or both. Debt consolidation can be used as a tool to deal with student loans debt, credit card debt, and other liabilities. There are different types of Debt consolidation loans so do your research first if this is the route you want to choose.
7. Renegotiate credit card debt
Like most consumers, you may be unaware that you can renegotiate your credit card contracts to pay a lump sum amount instead of costly monthly payments. This is known as debt settlement.
All you have to do is ask. Give your creditors or lenders a call and request a lower interest rate on your credit cards. As long as your payment history is good, you have a chance of getting some relief.
You can also negotiate credit card fees. If your creditor is unwilling to work with you on a new interest rate, you may ask if they would be open to waiving some of the fees and recurring charges you face.
Credit cards are the only bills that can be lowered with a phone call, the outcome may surprise you. Most credit card companies will want to keep your business and will offer some other options to get a lower monthly payment.
8. Create a family budget
Financial health benefits all the family. It’s common to see one member of the family be responsible for all of the household’s finances. This often means that no one else in the household knows what’s really going on. If you’re going to be successful, it’s important to have a strict budget to pay off a debt that the whole family knows about.
Come clean with your partner and family members. If they don’t know your full debt situation, then you’re going it alone. Tell them about the debts, your plan to pay them off fast and get them on board with your repayment strategy and debt management plan.
You need everyone in the house to participate in the budgeting. You have to involve them in this process and get them on the same page.
This might include some hard conversations. Your kids might have to accept that you won't be splashing out at Christmas or you may have to cancel the gym membership.
If handled correctly, these types of conversations can be beneficial for kids. Budgeting and savings are excellent personal finance skills. Keep them involved in the budgeting process and let them pick out specific goals to aim for. Focusing on this goal may make them less likely to splurge elsewhere and more helpful to you when it comes to keeping the family on a budget. Explain how they can help cut down on household bills too.
9. Create the best budget to pay off and stay out of debt
Life happens in an instant, and you may not have the savings and income to survive an emergency or any other sudden financial change. That is why it’s important to have a budget that is flexible to support you in any situation.
Flexibility is vital to success, if you’ve done all of the prep work and put your budget in writing, it will be easier to make the necessary adjustments.
Don’t be afraid to start completely from scratch and create a whole new written budget. If your life changes, change your plans along with it. Use what you’ve learned so far to create an even better budget than before.
There may also be times that you must adjust to a temporary budget. Sudden events that take a sizable chunk of your income may require you to have a particularly strict budget for one or two months. Even two months of budgeting and saving can help you catch up financially and keep you on top of paying your debts.
Getting out of debt fast means making sacrifices. If you’re not committed to going without things you want for a while, you’ll never succeed in getting rid of your debt.
10. Get some professional advice
IVA Advice provides professional debt help and advice. They can help you decide what the best steps are to take to reduce your debt. They will help you with your credit card bills and high-interest debt.
It’s important to remember that it’s not about how much money you make. High-income people can also have debt, while some low-income households can live debt-free. Your spending habits can be adjusted to match your lifestyle. The sooner you develop those good spending habits, the better.
IVA Advice has qualified financial coaches and a credit counsellor ready to help you set up a debt repayment plan and get out of debt today. They will look at your credit report, credit score, student loan debt and credit card debt and work out the best solution for you.
With time you will be able to wave goodbye to your student loans and personal loans and feel as light as a feather without the burden of debt.
IVA Advice provides free, qualified advice to help you solve your debt problems for good. With many years of experience and a team of friendly experts to chat with, you can rely on them to help you reclaim financial control.
They specialise in providing quick and easy advice relating specifically to debts. There’s a lot of information out there, but they won't overload you with financial jargon or leave you feeling more stressed than before. They give you a plan of action that will help solve your financial problems by reducing or eliminating debt, whether it’s a personal loan, mortgage debt or even some outstanding invoices which are affecting your business.
What is an IVA?
An IVA (Individual Voluntary Arrangement) is a debt solution that you can use if you are struggling to repay your unsecured debts. An IVA is a formal agreement made between you and the people you owe money to. You won’t manage the IVA yourself, it will be managed by a qualified Insolvency Practitioner.
An IVA will allow you to pay back a small portion of your total debt based on what you can afford. Any unaffordable debt will be completely written off. You can make payments to your IVA with one affordable monthly payment. Contact IVA Advice to find out if you qualify.