It’s time to get out of debt. Owing money can hold you back from a lot of things: starting a family, buying a home, or saving for your big dreams. Even if it feels tough, a smart approach to saving money can make a world of difference. The first thing you need is a plan.
Track Your Real Expenses
Before you can make an accurate budget, first you need to know where your money actually goes. Otherwise, it’s all aspirational. There are a couple of ways to track your real expenses besides holding onto every receipt. The easiest are probably using an app or using your debit card for every purchase.
Make a Budget
The single most important thing you need to do if you want to get out of debt is making a budget – and following it, of course. When you control where your money goes, and how much of it goes anywhere but your bank account, you get to make the decisions. Do you splurge on takeout tonight, or do you put that cash toward paying off credit cards? Just being aware of how you spend your money can change your approach to it.
You know where you need to cut down, but there’s one big problem. For all the “nice-to-haves” that you know you need to cut out of your monthly spending, you likely still have a ton of money going to essentials like groceries, clothing, personal hygiene, utilities, and transportation.
While you have to have all these things, that doesn’t mean you can’t save by changing where you shop for them. There are a few things you can do to trim essential spending:
- Grocery shop at more affordable supermarkets,
- Get thrifty the next time you need a new outfit,
- Get a cheaper internet or data plan,
- Sell your car and rely on public transit, or get a more affordable lease.
Reconsider Your Housing Costs
Housing costs like rent or your mortgage are also big-ticket budget items, and it’s without a doubt the hardest to change. You likely have to be in real trouble to consider moving, but there could be a strong case for it.
Many people have become frustrated with high rents in urban areas around the world. The recent pandemic was enough for many to give up on their cities entirely and seek housing in cheaper suburbs.
Financial advisors suggest that your rent should only consist of 30% of your after-tax income, with the other 20% going to other essential spending. In many cities, that’s just not possible, and savings are usually the first sacrifice people make.
Debt Consolidation Programs
Debt Consolidation Programs can be a good way to manage debt when it’s otherwise insurmountable. In a DCP, a certified Credit Counsellor from a non-profit credit counselling agency negotiates with your creditors to reduce interest rate charges or stop them completely. Not only do they make it cheaper to pay back your debts, they also simplify it. Instead of paying each individual creditor, you just make one monthly payment.
Credit Counsellors can also help you with budgeting and money management to make sure that you can make those monthly payments and stay on track toward debt freedom.
A smart plan makes it possible to beat your debts. Track your spending, make an accurate budget, reconsider your expenses, and if it’s all still too much, try options like a Debt Consolidation Program.