4 Things you need to do right now if you want to pay off debt


Ready to pay off your debt once and for all? These 4 things you need to do right now if you want to pay off debt is a must read.

Do you have a debt that you want gone?  Whether it’s a car loan, personal loan or credit card, chances are it’s costing you a whole heap of money in interest –


money that I’m sure could be better used elsewhere.  It might even be costing you more than just money.  Carrying debt can cause stress, and there is no worse feeling than laying awake thinking about your finances night after night.

The number one way to reduce this stress is to make a plan to pay off that debt once and for all.  Before you make a start, you need to do these 4 things first.


Face your debt.  How much do you have?

Unfortunately ignoring your debt wont make it go away.  This is probably the most terrifying step, especially if you have a few different types of debt and have never added them up.  It’s so easy to just make the minimum repayments each month and ignore the balance and interest rate.


The first thing you need to do is make a list of all the debt you have.  Make sure you include everything, no matter how small.  Now add them all up and write down the total balance.  It’s going to be painful, but once you have overcome that initial fear you can accept the situation, and begin to make a plan to move on.



Stop using your credit cards immediately

So you have made the decision to become debt free?  Then the absolute last thing you need is to add any more to that debt, not even a cent.  You will just end up further and further in debt.


It can be scary to give up your credit card, after all it becomes a security thing, knowing that you have the backup of credit there if you need it.  But where the problem lies.  If having a credit card in your wallet makes you secure, then chances are the things you are using your credit card to pay for are things you couldn’t actually pay cash for.


The solution to the problem is difficult to accept once you are in the habit of using credit, but it will change everything.  If you can’t afford to pay cash, you can’t afford it.  If you don’t have a credit card, you have to say ‘no’.


Some people freeze their credit cards in a container of water, meaning they have time to think about a purchase while they defrost their credit card.  The problem is temptation will still be there, and ice can be defrosted very quickly with a hair dryer.  The best thing you could possibly do is to cut up your credit card, then it’s impossible to use it.



Create a budget

If you don’t already have a budget, now is the time to make one.  A budget doesn’t have to be restrictive as many people think, but is an amazing tool that will tell your money where you want it to go, and help you determine how much money you have left over to pay off your debts.  If there are expenses that are extremely important to you, include them as a budget expense, but just be sure to keep them minimal until your debt is gone.


Don;t worry about making your budget too complex.  It can be as simple as taking a piece of paper and listing your expenses.  Add up your expenses, subtract the total from your income and you have an amount left over that can go straight toward those debts.


If your expenses are equal to or higher than your income, leaving nothing left over for extra debt repayments, it might be time to consider taking up a second job or finding alternate ways to make money.  If it all starts to seem to hard, remind yourself that it’s not forever.  It’s just a temporary measure to reach your financial goals.


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Create an emergency fund

Right now you are probably wondering why I am suggesting creating a savings fund when the aim is to put all spare money towards your debt.  It’s for a very good reason.


As I mentioned earlier, the last thing you want to do when paying off debt is to add even more debt.  If you have no savings whatsoever because all of your money is going into debt repayment, and an emergency happens, you are going to have to take out another loan to cover that emergency.  The cycle can just keep going and going.


You need a buffer, and debt should never be the automatic answer to any big expenses that unexpectedly arise.  It doesn’t matter how big your emergency fund is to start, as long as you start with something.  Even if you just add $10 every time you get paid, at least there will be some sort of buffer there is something comes up.  The goal amount of your emergency fund is ultimately up to you, but try making your initial goal something like $1000.  It’s not a daunting amount to save, but could still be super helpful in the case of an emergency.  Having this money set aside is going to take a whole lot of stress off your shoulders.


My final piece of advice – only spend your emergency fund on an actual emergency.  An emergency expense is something that can not wait, like a medical bill or urgent car repairs that make your car un-driveable.


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