Sorting Out Your Debts

Most people have gotten into debt by getting themselves into a cycle which never seems to end. The first step is spending more money than you earn. Once you start doing this, you’re going to create a deficit which is never going to be good for your bank account. You’ll then need to borrow money in order to fill in the gaps. Your next pay check will mainly be spent on paying back the debts. If you then continue this cycle, it will never stop, and the more debt you owe, the more difficult it is to pay it back.

  1. Start by doing a budget

By planning a budget, you’ll be able to set out everything in front of you and you won’t just carry on guessing at how much you’re earning and how much you’re spending. However, your budget needs to be realistic if it’s going to work properly. Don’t budget £30 a week for a family of four when you have been spending £120 per week in the past. The more realistic your budget is, the more chance it will work. Cut back on things that you know you will be able to cut back on, and leave yourself some room for having fun, such as dining out or going to the cinema once a month.

Sorting Out Debts

  1. Look for financial help

Look for financial help if the form of money that you won’t have to pay back. For example, you might be able to claim benefits if you’re earning under a certain amount. Single mothers, people working 16 hours a week and those on low wages can all claim benefits in various forms. While you might not want to look to the state for some help, it could help you out when it comes to your money matters.

  1. Use savings to pay your debts

It’s definitely a good idea to use any savings to pay your debts. While this might mean that you don’t have as much emergency money as you’d like, it’s a much better idea in the long term. If you have a lot of debt and you don’t pay it off straight away, you’ll start to amass lots of interest over the coming months and even years. By using savings to pay off your debts, you will ensure that you avoid paying all that interest, and in the future, you’ll be able to save more rather than use your wages to pay off debts.

How To Be Debt Free

Without even intending to, you are already in debt the minute that you graduate from college because of the student loans that you probably had to take advantage of. Once you secure a job, part of your entry-level salary will be allotted to paying off these loans. Then comes the credit card offers from different companies.

In order to have a means of purchasing things, you may want to sign up for one or a couple of these cards. Before you know it, you have more debt than you can easily repay because of the ease by which the plastic card can be used to purchase things. It is exactly the ease of access to credit which tempts most people into borrowing more than they can pay back. The result is being in debt even before you can build a solid credit history for yourself.

Most Popular Way To Be Debt Free: Debt Management Plans

The good news is that there are several ways for you to become debt free. If you only managed to acquire a lighter load of debt instead of very serious debt problems, then a solution is to go for debt management.

Debt Free

First, let us compare this with another solution to get rid of debts, which is to take out a debt consolidation loan. When you go online, there are plenty of companies which offer such loans to consolidate your debt. The idea is that instead of paying two, three or four credit card companies, you only have to pay one. The funds that you will get from the debt consolidation loan will be used to pay off your other loans.

At the end, you will only be left with one loan to pay which is supposed to have a lower monthly payment and a lower interest rate. The problem with going for this solution to be debt free is that you may not necessarily have a lower monthly payment and a lower interest rate means that you are paying off the new loan for a longer time frame. Continue reading