Discover how to pay off your debts with 7 tips

Easy credit, advertising and a lack of financial control are causing more and more people to take on debts, usually to achieve consumer dreams that they are unable to afford at that moment. At other times, emergency situations can cause even the most financially controlled person to end up in debt.

In all cases, taking back the reins of financial life requires sacrifices and commitment. If you don’t know where to start, we’ve separated some tips to help you get out of the red as soon as possible.

 

Find out where your money goes

Find out where your money goes

The first step in regaining control over your financial life is finding out where every penny you earn or owe goes.

For a period of at least one month (ideally at least three), make a note of everything you spend, from the car finance portion to the coffee at the bakery. With these expenditures in hand, divide your expenditures between essentials and other expenditures.

 

Review spending

Once you find out what your non-essential expenses are, it’s time to decide which ones you are really willing to give up, or at least decrease. It is useless to say that you will no longer go out to dinner until you pay the debt if you are unable to say no to friends and family. Review what is really important and only promise what you can keep. Otherwise, you may quickly become frustrated and miss your goal. If possible, talk to people who live with you, so that they can not only understand during this phase, but also support you.

 

Make a budget

Make a budget

With your expenses in hand, it’s time to define how much of your salary goes to each one. Make a budget for your expenses and try not to run away from it. When making the calculations, remember that your goal is to pay the debts, so put reasonable amounts to be fulfilled, but without wasting money. In order to regain financial tranquility, some sacrifice is necessary.

 

Find out how much you owe

This is the most difficult part to face: discovering the size of the debt. Calculate everything you owe and find out exactly what interest you are paying. This will help you to define which situations are most urgent and how long it will take you to pay off all amounts.

 

Prioritize debt payment

debt payment

If you have more than one debt to pay, start with the ones that charge the highest interest, or those that you may experience a cut in service provision in the event of default. Get rid of your credit card and overdraft as quickly as you can, which are always the great villains of debt.

Direct all of your extra earnings, such as holidays and the thirteenth, towards the payment of debts. If in any month you have more money, pay more than the installments, so you finish paying off faster and pay less interest. With that in mind, consider selling some goods to pay for everything at once. It is more worth saving money to buy a new car than sending everything to the interest.

 

Negotiate your debt

Now that you know how much you owe it is time to assess how long you can afford to pay everything. Look for your creditors and see a possibility to renegotiate the debt, to get installments that can be paid off with lower interest rates. If you can’t get a favorable deal, it may be time to talk to your bank for a credit transfer. In such cases, the bank settles your debt and renegotiates the amount with you, often at lower interest rates than you would pay. Whatever your option, never fail to pay the installments of the renegotiated debt, or you may end up getting out of it worse than when you entered.

 

Don’t take on new debt

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While you are in this discharge process the only new debt you can take on is that of renegotiation. Except in cases of emergency, during this period, pay for everything you buy in cash, so that you have full sense of how much you are spending.

During that time, keep in mind that the results may take a while, but if you have discipline they will surely arrive. Patience is the key word for the success of this mission!

Do you have any other tips to help people get out of the red or even save for a big dream? Comment and share your story with us!

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