If you read the about us section of Counting Coins, you will know that the writers of this site are also on the path of financial recovery. I compiled a list of 4 things that the “experts” suggest we do to get out of debt.
Note how I did not use the words “easy”, “simple” or “quick” in the heading of this article. By now we know that getting out of debt is none of those things, and can’t be achieved overnight. Please feel free to help others trying to get out of debt by adding your own tips to this list in the comment section below this article.
Here are the 4 things we can do today to help us get out of debt:
1. Write it down
This makes sense right? Putting anything down on paper (or on an Excel spreadsheet) always helps to get you started and guides you to formulate a plan of action.
This is what you need to do:
- Get the latest statements from your bank and credit providers.
- Include as much detail on your spreadsheet as possible, like the amount of debt outstanding on each account or loan, your monthly repayments, interest rates, amount of months left, etc.
2. Cut it, block it, stop it
For me, this is one of the hardest things to do. I manage to make all my payments every month, but then I end up using that credit again to make it through the rest of the month. I would, for example, make a payment on my credit card and then use the newly available balance to buy groceries.
You realise you are really screwed when you start paying debt with debt. Like making a payment on your credit card and then using your credit card to pay your personal loan.
Before we can slit the throat of the debt monster we have to stop feeding it. Sadly, not all credit providers allow you to block your account while still making payments. Wherever possible cut your cards, block your accounts and stop buying on your credit card. The first month is going to be the hardest, but it will get easier from there.
3. Prioritise your debt
Decide what debt you want to pay first. Although you should try to make all your required payments, it will help to list your debt according to priority. Whenever you have some extra cash, make a payment on the debt at the top of your list.
The most mathematical way to prioritise your debt is according to their interest rates. So pay your most expensive debt off first.
I myself, however, prefer to pay my smallest loans first. This way, I stay motivated as I see my list becoming shorter.
4. Reward yourself when you reach milestones
For some of us, becoming debt-free can take years. It is a long and depressing road, so make sure you reward yourself for good behaviour. Whenever you’ve paid off something, reward yourself with a gift from you, to you.
Remember to keep your rewards, just like your goals, realistic and affordable.