Ways to Reduce Debt
In the current scenario, with an increase in the standard of living and the rising costs of necessities, we have seen a surge in the number of middle-class families that are borrowing money to meet their family’s needs.
Furthermore, the younger generation has an excess cash flow in their initial years of working. Lack of responsibilities makes it easy for them to have more money than they need. Thus, this salary is used to live a luxurious life. As they advance in their career, family responsibilities increase along with the salary and thus, they are in a troublesome situation of being entitled to a standard of living that they cannot afford. In such a case, credit cards and cover loans are highly rated as saviors. Plus, they also offer you loyalty points for your next purchase. Cherry on a cake, isn’t it?
The dream of owning a home, having a fulfilling career, settling down, maintaining a lifestyle, etc. all will lead to growing debt, and you will be stuck in the vicious debt cycle before you even start to realise it.
But is this an ideal situation to be in? Definitely not. In the chase of always ‘wanting more’, people tend to miss out on the rate at which they’re piling up the debts. Any income can be spent, but when contingencies arise, managing day-to-day expenses along with debt repayment becomes a huge issue.
Does this mean you shouldn’t borrow money at all?
There are good arguments about debt and leveraging being beneficial, like a mortgage, since it’s a smart investment, considering the lower interest rates.
Debt, if used well, can create income-generating assets to boost your income and improve productivity; otherwise, it is wasted only on things that won’t add value.
But while you take steps in creating these assets and keep borrowing on money, one needs to understand that it takes years to get out of debt.
Following are the key things to remember, which will lead your way towards a debt-free life.
Understanding your debt: Understand your debt, i.e. whether it is consumer debt (credit card bills, personal loans) or secured debt (car or home loans). Understanding the kind of mortgage you are stuck with will help you to come up with ways to starting paying it up.
Plan your finances: Make a list of your mandatory expenses which occur to keep your routine going (Grocery, Electricity-Water-Telephone Bill, EMIs, etc.) and always ensure that you have enough cash in hand to pay for these. Set aside 3-4 months mandatory expenses. This would be beneficial in case of any emergencies and would help you to avoid adding debt.
Set goals: Find the goals that inspire you, and you’ll have no problem focusing on the same. After listing down your cash inflows and outflows, look out for the surplus balances that can be channelized towards these goals. Find out the investment avenues which would help to achieve these goals. This would indirectly stop impulsive purchases.
Turn your junk into cash: We always tend to make impulse purchases only to realise later that it was unnecessary. Things that are untouched in your house in the past year indicate that you may not really need them anytime in future. So, why not get rid of it by selling it off and get yourself some extra bucks? Many websites today offer a platform wherein you can sell your used products at a reasonable price. Limit your overall debt payments to a maximum of around 35% of your gross income. The lower, the better.
Turning towards online lenders: One of the ways in which you can get rid of your short-term debts would be to apply to websites that help you connect to lenders. These are legit websites that have lenders that can lend you the money to get rid of your short terms of cash problems.
The lenders on such websites help you clear your short-term cash deficits by providing you with loans that are not based on your credit checks. Some of the lenders, however, do insist on having credit checks to make sure that you’re not in insolvency and to also verify that you have no unpaid loans with others venders.
Websites like www.PaydayMe.com are easy to operate, apply to and also help in receiving loans very quickly. However, it is imperative that you pay back these loans on time to avoid the high late fees and form a healthier business association with these lenders.
It isn’t wise to add on to more debt than you already have, but if situations arise where you absolutely must take on loans to clear your mortgage, the essential thing that you can do is thinking of ways to paying it back first. Assess your situation and consider the options that will work best for you.