Being overwhelmed with many different debts can be very stressful to navigate. It’s very hard to escape the situation, and it can feel like walking endlessly in a never-ending cycle. However, it’s still possible to get out of these financial hurdles and get yourself back into a more stable situation. Though it doesn’t happen overnight, there are a few effective ways you can break the cycle of debt.
Here are five effective finance tips and tricks to escape the debt spiral and start improving your finances.
1. Cut Back on Your Main Expenses
If you want more money to repay your debt, it’s time to change your lifestyle and limit your spending. You can make meaningful reductions while still living as comfortably as you can. It can be a small sacrifice but it will be worth it in the long run.
For instance, ride a bike or walk instead of driving to save some gas money. Unsubscribe from multiple services like streaming sites, subscription boxes, and similar entertainment programs. Limit eating out or ordering takeaway and switch to healthier meal planning instead.
2. Monitor Your Income and Expenses
If you are unsure of your actual financial situation, sit down and track where all of your money goes. Learn how to live on a budget by examining how much money comes in and how much goes out. You don’t have to do it too specifically, but jotting down each main category can help you understand what you are spending on and where you might cut down to make space for debt payments.
3. Avoid Spending on Unnecessary Things
Once you’ve jotted down all of your income and spending details, you should be able to identify which expenses are for needs and which ones are just for things you want. The key to getting out of debt is having more money you can use for repayments. What you can do is rethink your spending, especially for things that you don’t necessarily need in order to survive.
Take these simple things as examples of expenses that you can live without:
- Cable subscriptions
- Unneeded insurance policies
- Pricey gym memberships
- Costly holidays
- Unnecessarily expensive gifts
- Cigarettes and vapes
- Pricey mobile plan
- Takeout
4. Quit Borrowing Money
The main thing you need to do to get out of debt is to quit borrowing money. For instance, the major contributor to debt is credit cards. Financial recovery will be much easier once you stop using your credit card for anything but necessities.
Start paying in cash so you’ll physically feel the money being taken out of your hands when you make payment. This way, you can have a tangible idea of how much you spend and limit yourself from going into a cycle of debt by revolving your line of credit.
5. Establish a Debt Repayment Plan
There are two main strategies you can use to work on repaying your debt: the debt snowball or the debt avalanche.
The debt snowball means focusing on your low-balance debt and making minimums on higher debts. By paying more towards those with lower balances, you can close them right away, allowing you to focus on the higher amounts and having the sense of eliminating debt and ticking something off of a list.
On the other hand, the debt avalanche means settling the payments of those with higher interest first so that you can save more money over time. However, this method can take longer if the amount you owe is too high.
Final Thoughts
Being under a mountain of debt doesn’t mean it’s the end of the world. If you apply the right strategies in managing your finances, you will be able to make an escape and work towards better financial choices.
If you want to learn more about debt management, you can work with a financial advisor on the Gold Coast to help you. Our team at New Wave Financial Planning is made up of the best financial advisors in the country. We will teach you how to manage your wealth and repay your debt to work towards your financial goals. Get in touch today!
