Summary: Get out of debt by changing your old habits and making more frugal choices
Before we even get into how to start getting out of debt, you need to come to terms with the situation you are currently in. Sit and talk with whoever it is that you live with. Everybody involved in this process needs to want to bring about change in their lives. And you do not have to be on the verge of bankruptcy trying to pay your debts in one huge lump sum to change your financial circumstance.
Get out of old habits
You need to commit yourself to not incurring any new debt. It is no good trying to get rid of old debts if you are just taking on more. It can be quite a struggle to do this, but it is essential.
So, what does this mean for you? It means you are going to have to start saving up for things! If you want that new phone, you better put some money into a savings account! You will have to make do with your current car instead of financing a new one until you’re in a more stable financial situation.
Also, get rid of any credit cards you have. Find some scissors and start cutting them up. This way, you will not be tempted to start swiping in the local mall when deep down, you know you will not be able to make repayments on time.
Rid yourself of existing debt
This may sound like an obvious point, but people often fail to realize they need to get out of the hole they are already in before making a fresh start. The best strategy for this is to arrange you are your debts ranging from the smallest debt to the largest debt.
Then, pay your smallest debt first, so you get a quick succession of minor victories. This will then allow you to save up to pay off your larger debts, which are even bigger victories!
You do not have to follow this advice, of course. Instead, you could wait until your small debts have been paid off you could choose to pay off the highest interest debts first, rather than just the largest debt already owed as this further increases your ability to save money correctly.
Have an emergency fund
Life can throw a curveball at you when you are least expecting it. Due to this, it is highly recommended you have an emergency fund at the ready in case of a sudden job loss or an important appliance breaks down.
You will not have to take out a loan or swipe a credit card if you can pull from your rainy-day fund, this ties into the earlier point about not taking on new debt at all costs.
Spend less on groceries
It might sound quite depressing to stock up on as many cheap non-perishable goods as possible so that you don’t have to go grocery shopping as often, but we promise that it will all be worth it in the end.
If you go through your finances, you will see just how much of your weekly outgoings are spent on food shopping. You could end up saving between $2,000 and $3,000 each year if you are more frugal with your food choices.
Work overtime or get a second job
Nobody wants to work more than they must. If you are in a deep level of debt, you may have no other choice.
Picking up a second job or working that extra shift can make a world of difference to your finances. The more money you are making, the quicker your debts can be paid off, and the less interest you will pay in the long run.
Make a long-term budget
Spend your money while following the tips laid out above for about 3 months and then put it into a spreadsheet. You will be able to see what your biggest outgoings are. You can then use this info to see where you could cut back on your spending to save more money in the long run.