Debt is nothing but a form of modern slavery which affects more people in today’s developed, technologically forward world. Money needs far more planning today than before, and with the ready availability of credit cards and other forms of credit, it might seem as though one can never run out of money. Well, for the debt ridden individual, life can seem like an endless struggle to repay and at the same time save enough to survive. For debt ridden families, it is even worse. While we do not claim to be finance experts of any sort, there are few universally acknowledged ways of getting started with a debt repayment process. We give you some creative ways to come out of debt, supplement your financial planning process and help you in your race towards a debt free and financially independent living:
Credit Cards, Scissors, Go!
Credit cards are the most vicious form of debt, which if accumulated can be extremely difficult to pay off. The reason why people prefer these cards is because they are fast, convenient and safe ways of using money, but with credit limits hitting the roof these days it is easy to keep spending and lose track of how much. If you have a history of credit card debt remaining unpaid, then the easiest, and we do mean easiest way, is to take a pair of scissors and cut up your credit cards. Shred them into pieces and enjoy your new found freedom of a debt free future – even though living without a credit card might prove to be difficult initially, you’ll just get used using cash or a debit card which does not keep piling up bills on you, along with interest. Cash is the best way to go for you if you’re trying to stay out of debt. Carry only as much cash as you will need according to your budget and spend it wisely. It’s a good idea to get a friend along to motivate you into shredding those credit cards if you cannot bring yourself to doing it.
Getting out of debt is a lot about eliminating some absolutely useless expenditures and living only on what you need. We’ve talked about minimalism before, it’s a way of life that focuses only on bare minimum needs. So start living minimally, throw or sell things you don’t need – old clothes, furniture, luxury items such as multiple televisions, air conditioners etc. The first rule it to not buy them at all, the second rule is to get rid of them as soon as possible. Remember, anything frivolous you spend money on is not worth your hard earned money and if you must resort to borrowing in order to buy these things, they’re definitely not worth it. Going minimalist is not only about having a minimalist home, but also a minimalist way of thought and action. Minimalist people don’t necessarily believe in economizing everything, but they know the value of things around them. When less is more, you realize the importance of the small pleasures of life. Keep your life minimalist in this sense – a minimalist physical space consisting of only the bare minimum necessities, minimalist social space consisting of few, strong relationships you can count on and a minimalist emotional space wherein you give your emotions only as much importance as they deserve in the larger scheme of things.
Envelope Necessary Expenditures
Another good way of making sure you follow a budget when it comes to necessary expenditures, is to determine how much you will need each week or month for each category say household items, food, snacks, clothes, bills, emergencies etc. and put the requisite amount in an envelope. Label it according to the category and put it all in a safe place. The idea is to not end up using more than the requisite amount on any of the categories, and hence if you find any of the envelopes emptying before time then that signals a spending problem. You are overspending on something and if you continue with this method long enough you will be able to pinpoint items you don’t actually need. This method of setting out a fixed amount for expenditures according to a budget is an easy way to prevent not only overspending, but also to be able to determine how much you can save if you making unnecessary purchases. If at the end of the stipulated time you have money remaining in any of the envelopes, then that is what you have saved and you can automatically move it into the next cycle of expenditures.
Read Finance Books and Resources
This may sound boring, but the underlying idea is about educating yourself as much as you can when it comes to financial planning. Reading financial magazines and books such as Total Money Makeover by Dave Ramsey or Your Money or Your Life, both excellent books on achieving financial goals. Moreover, if you’re in the process of repaying your debts, and find yourself with little or no time to read you can even look at other resources such as podcasts on financial planning or CD sets such as the Financial Peace University CD Set which you can even buy secondhand to save money on the CD cost. What is important is that you read more, focus on achieving financial goals and for this purpose you educate yourself about how things can be done, what you must keep in mind, quick tips on managing money. Finance books and magazines are readily available and when it comes to resources like these, they’re more of an investment than an expenditure.
Make a Payment Calendar
Repaying debts takes some considerable planning as well. You don’t want to overpay your debts all at once and then find yourself left with nothing to get through the rest of the month. For this purpose, make a payment calendar for yourself. This will consist of a proper plan as to how much money you will be directing towards the repayment of debts, and how much money you will have remaining to carry out other expenditures. You can either make it weekly or monthly. It’s always a good idea to repay all the small debts at first and then focus on the bigger ones. Money borrowed from a friend can be paid first, and then you can move onto bigger bills such as credit card bills or household amenities bills which also have a late fee attached to them. Just as we do some planning before making a major purchase, we must plan to repay a major debt. If you cannot pay a certain amount during that week or month, don’t push yourself into it. Consider it again in the next cycle and instead think of ways to raise more money such as getting a second job or selling some items you own.
Block Online Shopping
Online shopping has caught the imagination of millions and websites such as Amazon and eBay have been in operation for long, shopaholics have spent thousands buying discounted products online with convenience of payment through credit cards or paypal and low cost shipping and delivery to the doorstep. However, online shopping also puts us at an easy risk of overspending because there are more options, more discounts and the convenience of it all at the click of a button can often lead us into buying more than we need. Majority of us do end up spending a lot on ordering things online, so the easiest way out? Block these websites of course! This may take a decent level of will power to do it yourself and stick to your resolve, but if you think you’ll break the promise then ask a friend to do it. It’s easy to block websites on any browser, and once you are unable to log on to them, over time you will find yourself losing interest in the idea altogether. The combination of no credit cards and no online shopping can in fact be extremely helpful to your cause.
Find Frugal Friends
If you’re friend group is into a lavish lifestyle and over the top expenditures, you might want to look for alternative company. Your friends have a major impact on your spending methods, and the constant need to keep up with them will render all your money saving and debt repayment efforts useless. Of course, you needn’t end these friendships completely, but their lifestyle will prevent them from motivating you towards a debt free living. Find people who will be a source of inspiration rather than a social pressure – these people could be living minimalist themselves, know the importance of economizing, can help you plan finances better and will understand the central role of repaying money in your life. Frugal friends are not necessarily scrooges who like to guard their money and refuse spending it at all, instead they like to know that their money is well-spent and what they decide to buy adds some real value to their lives. Similarly, a frugal friend will automatically discourage you from borrowing, instead their advice would be to buy something later when you have more money.
Start an Emergency Fund
Life’s unexpected situations and events can sometimes result in major expenses which one had not planned for. In these situations, if you find yourself with not enough finances, you resort to borrowing in the form of loans from a friend or a bank. Once you have paid all your debts and are living a life of freedom, make saving a habit. In this regard, certain insurances such as life insurance and medical insurance are worth considering for unexpected life circumstances. Apart from these, start an emergency fund for other unexpected expenses or additional claims which instruments such as insurance does not cover. This fund can be started in the form of a recurring deposit with your bank, wherein you put a part of your income into the deposit every month and get interest on it as well. Ideally, aim for a deposit worth 3-6 months of your income, which can be used to make up for unexpected personal or family expenses.