Sometimes it can seem that there’s no end to the payments and bills coming through your door. You might feel as if you’re amassing new debts all the time without knowing how to pay them all off. However, with a simple budget and a good plan for the future you’ll soon see that it is possible to pay off lingering debt.
Planning for the present and the future
The first step towards managing your finances and paying off lingering debt is to draw up a budget based on your monthly income and expenses. Use a tool such as Mint or just a basic Excel spreadsheet to lay everything down in a layout that works for you. Keep it simple so that you can clearly see any areas where you can reduce your spending.
Control the money coming in
When you first draw up your budget there will probably only be one or two kinds of income. That is, your basic salary and the salary of anyone else in your household. Although it is best to keep this figure as a baseline there are plenty of other sources of income that you may not have considered, such as:
- Work bonuses. A lot of us get yearly bonuses, often based on performance or time spent at the company. Avoid the temptation to splurge and use up all of your bonus on a luxury item or getaway and instead use it to contribute towards paying off lingering debt.
- Sell unwanted items. Scour your house for old unwanted gifts and household items that you just don’t need any more. Not only will this make you feel good about your house, you’ll also be helping someone who wants to buy second-hand as well as adding those all-important dollars to the bank account.
- Take on more work. No one should have to work themselves into the ground, but doing an extra shift every now and then can help boost your bank balance. Tell yourself exactly what you’ll be paying off with that extra money and it’ll all seem worth it. Also, there are jobs that you can do from home – ideal if you only work part time or if one person in the family stays at home instead of going out to work. These can be flexible enough to allow you to work around your existing commitments, and you might be able to learn some new skills at the same time.
- Rent out a spare room. If you’ve got the space, renting out a room can provide a steady source of income. Depending on your own lifestyle and location, you might consider doing this for just a few weeks of the year for a quick cash injection.
Once you’ve seen the money rise in your account and you’ve started paying off lingering debt you can give yourself little rewards now and then. Set yourself a goal, such as paying off $5000 of your credit card debt, then treat yourself when you get there!
Control the money going out
There are certain tactics that you should consider when paying off lingering debt. Firstly, order your debts by interest rate and start off by paying off the one with the highest rate. This will stop it from spiralling into a more worrying figure. Also, make sure that you pay off more than just the bare minimum on your credit cards. This is the only way that you’ll make any dent in your debt. You will probably want to contribute more of your budget towards some debts than others.
When it comes to credit cards, it pays to be a savvy shopper. Firstly, try to halt all spending so that you can pay off your lingering debt without making it even bigger. Secondly, look at the cards that you currently have and shop around to see if you can switch to a card that offers a zero-interest balance transfer. Make sure that you check out the fine details, though – the zero-interest only lasts for a short period of time before reverting to a normal rate, so try to get everything paid off in this short time period. The last thing to do with regards to credit and store cards is to alter your own spending habits. Look through your bank statements and see where you’re spending the most money. You may find that there are lots of little amounts going out here and there, such as for coffees or snacks. Cut back on these small amounts and you’ll be surprised how much you save in the long run – every cent counts towards paying off lingering debt. Another handy tip is to delete your card details from online stores. It’s often the convenience of a quick check-out that lures us into parting with our cash.
[Read: Knowing When to Pay off Debt]
Small changes and a better understanding of our money contributes to us leading a better, more controlled financial life.