Sometimes, no matter how hard you try, there simply isn’t enough money. Bills are piling up, the raise you got at work is barely enough to cover the raise of your rent, commute expenses, and your weekly grocery run. So you resort to taking a loan, or a credit card cash advance, and things snowball to a point where you can’t pay the minimum balance on your card either. Don’t worry, there are always solutions.
The first one is to consider a debt consolidation loan. They are loans that will put everything you owe on your car loan, personal loan, credit cards, and so on… under one roof, with one monthly payment that is usually lower than what you pay on all your debt combined. Sounds good, right? Usually, the interest rate is also lower than what you used to have on your average debt. But because the term of the loan is longer, you will end up paying more money. This is a very convenient short term solution to allow you some breathing room in your budget, but what you want to do most importantly, is start spending less than you earn. And that is achieved by a combination of the following: spending less and earning more. As you increase the gap between earnings and expenses, you will have enough funds to start saving extra cash, to repay your debt, start building an emergency fund, and prepare for a great financial future.
Spending less is not as hard as it seems. A lot of the time, the money we spend day in, day out, is mindless spending. We get out of work pretty late, so we pick up take-out on the way back. How about trying to prepare your meals at home on the weekends, so you can have a portion of something healthy and satisfying ready to warm up in the fridge when you had a long day? The average household spends over $800 a year on food they throw away, that would make a big dent in your debt without affecting your lifestyle. So try to be more conscious about waste. Turn off the lights when you are not in a room. Use your car when you absolutely need it, and run errands on the way back from work. Don’t be tempted by lifestyle inflation or by your friends saying you need to do this or that. Instead, ask the people whose lifestyle you admire for financial advice.
When it comes to earning more, there are a few easy solutions too. Try to stay a little longer at work if you are paid by the hour. Even 20 minutes every day will add up to almost a day at the end of the month. See if your company needs extra skills that no worker has, and study for that on your spare time, then ask for a promotion since you are doing some extra work. You can also pick up a little side hustle such as walking your neighboors’ dogs in the evenings together with yours, or baby-sitting their kids while they are going out.
Getting out of debt is like going on a diet. You won’t get financially fit overnight, but with the right habits and mindset, you will slowly build a strong foundation for a better financial future.