Special thanks to Purple Camel Media for making this post possible. All opinions are my own.
Have you found yourself in the terrible throes of debt? It’s easy to become overwhelmed by overdue bills, but ignoring your debts isn’t going to do your finances any favors. If you’re looking for ways to improve your financial health and get yourself set up for success in the future, use these simple steps to pay off debt.
Simple Steps to Pay Off Debts
Create a New Budget
The first step in any type of financial woe comes in creating a new budget. To do this, you need to examine your debt to income ratio. Consider all the necessary expenses you have in a month: rent, education costs, food, insurance, etc. You must also be sure to set aside money for any unexpected costs that arise. Life has a funny way of knowing when we’re down—that tends to be when it throws us curveballs. Reducing your unnecessary expenses and cutting it down to the basics can help you allocate more money towards paying off those debts.
Change your Habits
It’s one thing to create a budget, it’s another entirely to follow through on it. It’s easy to continue the money habits that landed you in debt in the first place. It takes a conscious effort to assess your behaviors and curb unnecessary spending. It might mean you have to quit eating lunch out every day; do meal prep on Sunday evenings to ensure you have homemade meals for the rest of the week. It might also mean ending your weekend shopping trips for new clothes, or postponing that summer vacation. Bare bones spending now means stable finances later, so it’s important to put your efforts into altering any negative spending habits.
Stop Credit Card Spending
Once you have your budget in place, be sure you don’t blow it through credit. The last thing you need to do when in debt is keep racking up those credit card bills. Stop or cut down on credit spending as much as possible. Avoid taking out any more loans, and stop shopping for things you don’t need with money you don’t have. Have a set amount of cash you can use for spending on any frivolous items—once the cash is gone, your excess spending is over. Be sure that you’re using coupon codes when you shop; the Honey extension for Chrome will gather all available codes for the items in your shopping cart to ensure you’re getting the best deal.
List Out Your Debts
To better determine the ways to tackle your debt, you need to have a comprehensive view of exactly what you’re working with. Stat by listing out all of your debt accounts with important details including interest rates and penalties for missing payments. You can order these for payment in a few different ways. Some organize their debts in order of largest to smallest amount owed; others do the exact opposite. Some are more concerned with the interest each account accrues; sorting your accounts in order of decreasing interest rate helps you first pay off the accounts that are costing you the most.
Get Professional Help
If your debts are overwhelming you to the point of frustration and despair, it’s time to invest in professional financial advice. The right advisor can help you come up with a budget, allocate certain amounts to the right debts, and give you an action plan. Tax debt is another situation that requires professional help. The IRS updated their fresh start initiative. This fresh start initiative helps taxpayers come up with payment solutions to pay off debt, without incurring excessive penalties and interest. It allows truant taxpayers to work towards getting out from underneath overwhelming debt. However, negotiating these agreements with the IRS can be complex and complicated. Usually, it’s best to hire the help of tax professionals who can help you determine the right terms and payment options with the government.
If you’re in debt and looking to get out of this dire financial strait, consider using these habits and strategies to your favor.