According to the financial guru, Dave Ramsey, “normal is broke” in America. Normal is having a debt of about $90,460, which is the average debt of Americans in 2021. Normal is having any or a mix of the following: personal loan, credit card loan, student loan, auto loan and mortgage.
If you are “normal”, you belong to 80% of the US population. You are one of the millions of people who had availed of credit and debt in the past 5,000 years because, believe it or not, debt has been around as early as 3500 BC, as mentioned here.
Whether you view debt as a necessarily evil or a financial tool, the economic and financial uncertainties brought about by the COVID pandemic showed us that being debt-free is the ideal way to live. People who had no debts were financially secure, experienced less anxiety and enjoyed more freedom despite the chaos that the pandemic caused.
If you are sick and tired of being in debt, you can still change your circumstances and enjoy a debt-free living. Read below the six ways to get out of debt.
1. Don’t Add More Debt.
It’s plain common sense. The first step to get out of debt is not to swipe your credit card again nor get another personal or car loan. In short, stop adding more to your list of debts. You will not get out of debt unless you stop accumulating debts.
2. Create a Budget
A budget is one of the best ways to manage your finances. List down all your income and expenses to get an overall idea of your financial standing. If you have more income than expenses, use that money to start paying off your debts after setting aside your emergency fund. If your expenses are more than your income, check your list and see if there are expenses that you can get rid of.
3. Increase Your Income
Oftentimes, people acquire debt because they don’t have enough money to pay for their needs. If this is your case, you need to find ways to increase your income to help in your debt-free journey. Get a part-time job, start a side gig, sell your stuff, find ways to earn money online, become a tutor, or turn your creative skills into moneymaking activities. You will need a bigger shovel to get out of your debt-hole faster.
4. Live Below Your Means
Another reason why people rack up debt is not having enough money to pay for their wants. If this is the case, it is time to act your wage and live below your means. Don’t try to impress other people by stuffs that are all bought on credit. Your peace of mind and financial security are worth way more than hundreds of likes on your Facebook or Instagram feeds.
5. Cut Your Expenses
Go back to your list of expenses and see if there is stuff that you can eliminate. Maybe you can downgrade to a lower Netflix plan or totally ditch your cable subscription since you barely watch TV anyway. Can you cut back on restaurant eating and prepare a healthier meal at home? Ask for car or home insurance quotes from other insurance companies, you might get a cheaper deal. Find ways to trim the fat from your budget.
6. Take Advantage of Freebies
A penny saved is a penny earned. Take advantage of free facilities around you. Instead of paying for a gym membership, why not jog around the park or play some tennis in the court? Most libraries also offer not just books but other free resources so be sure to check them out. Consider collecting coupons for your frequently bought groceries and supplies but don’t buy something you do not need just because it is on sale.
Final Thoughts…
Getting out of debt will not be easy. You need to want it badly for yourself and your family. But, do not worry. With perseverance, diligence and determination, your sacrifices and hard work will be worth the freedom and security of debt-free living.
[…] Even if the credit reporting and calculation processes are complicated, there are still simple steps you can take to raise your score and open up new and better credit opportunities. However, to keep your finances in tip-top shape, you also need to consider getting out of debt. […]