Debt is something that creeps up on you and then suddenly you realize you’re in over your head. Unfortunately, it isn’t long after the discovery that your bills start to fall behind and become seemingly impossible to pay on time, and now you find yourself in a terrible spot with no credit too. While it may feel like your lifestyle of comfort is over, this is a temporary state, as there are many ways to reduce your debt.
Many people, who compile a lot of debt without notice, do so because they don’t have a budget in place to give then a visual monthly of the money they spend and want they spend it on. The first order of business is to create a budget and then stick to it. All you need is a pen and paper to get started and then make a list of all of your expenses and then deduct that figure from your net income. With the amount left over, you can dedicate a percentage to a savings account and then use the rest as your spending money. If you show a deficit after your deductions, then you will need to free-up monies or bring in extra money by taking on a second job to break even.
Paying Bills on Time
When you take on too much debt, it becomes increasingly harder each month to pay the bills on time. As a result, you acquire late fees, and credit card companies may even increase your interest rate. However, it doesn’t stop there. In many cases, because your credit score is now below a good standing, you will pay more for just about everything. For instance, if you move to a new place, the utility companies will now require a substantial deposit and because you’re considered a high risk getting the best rates on things like car insurance can present a problem. Thankfully, there are companies that understand people can encounter periods of difficulty with their finances and offer high risk car insurance at reasonable rates.
In order to restore your good name, you need to reduce your debt and bring your bills current. A good way to do this is to consolidate your debt so that you can make just a few payments versus many. If you have a mortgage and have equity in your home you can try to refinance it. If that option is not available, you can also borrow funds from your 401K and repay you with interest. Or, you can apply for a credit card that lets you transfer balances and then you’ll not only pay off the other cards, but you’ll have one lower monthly payment, and in most cases, interest-free for a period of time.
Change Your Spending Habits
Of course, you can’t forget how you got into financial difficulty in the first place, by taking on too much debt. This is where moving forward; you have to distinguish between the “wants” and the “needs”. The things you need are a roof over your head and food on the table. What you may want are things like a new 4K flat screen television and a designer handbag. The needs are must-haves, however, the wants, are just that, you want them. For those items, you need to learn to save money in order to purchase them. By doing that, you’ll you won’t add any more debt to your budget and you’ll appreciate it more.
When money gets tight, your personal skills can come in handy to complete various DIY projects around the home. Changing out faucets, replacing light fixtures and restoring old hardwood floors are all things that you can do, and avoid hiring someone else. Of course, if you encounter something like a major plumbing problem that needs repair, it’s best to bring in a specialist. Just make sure to shop around to get the best price.
Getting into debt can affect every aspect of your life in a very short amount of time. The good news is that there are ways to reduce your debt and raise your credit score so that you can start once again to enjoy a comfortable lifestyle.