Just half a century ago, it was considered shameful to have debt. But, in our age of car loans and mortgages, people live according to the philosophy “buy now — pay later”. So it is only natural that when you rely on loans all the time, you may accidentally get trapped in debt.
But don’t be afraid – it is possible to survive debt without ruining your future in the meantime.
The easiest way to get rid of your debt is to add 10% of your gross income monthly to cover your debt. Say, you get $4000 per month and have debt payments of $1600 each month. But instead of just paying out his sum, add 10% off your gross income ($400) and increase your monthly debt payments to $2000. But instead of using this extra money to cover all debts, focus on just one debt that you can eliminate the soonest. This way, you will eliminate your debts one by one. If you don’t have enough financial resources to pay additional 10% of your gross income each month, settle for 10% of your monthly debt payments.
Analyze Your Debt Situation
The first thing you need to do is to determine how much you owe and to whom. Compile all your debts (including your credit cards, mortgages, loans and so on), determine, how much you owe to every creditor, what the total amount of your debt and the monthly payment to every creditor are.
Realizing what your total debt is might be terrifying, but there is at least one good thing about it – it means that you have already started working on settling it.
Work out Pay-Off Priority
You can decide what debt to pay off first by determining the pay-off ratio. Just divide the current total balance you owe by the monthly payment and give priority to debts with the lowest ratio.
Continue paying off all your monthly payments, but use 10% of your income to cover the debt with the lowest ratio. It is also important not to create any debts in the meantime because it will only further complicate your life.
Invest Debt Funds
Once you have paid off one debt, make the money that you once used to make your debt payments to work – invest it instead of spending. This way, you will build a better future for yourself and ensure that you will not get buried in debt once again.