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Debt can feel like a heavy burden that’s constantly weighing you down. But with a few good habits, you can start to take control of your finances and work towards a debt-free life.
In this post, we’ll explore some practical practices to help you get out of debt and stay on track.
Habit #1: Creating a budget
Creating a budget is one of the most important habits to develop when getting out of debt. It allows you to see exactly where your money is going and where you can make changes. Creating a budget doesn’t have to be complicated or time-consuming.
Start by writing down all of your income and expenses for the month. Then, categorise your expenses into fixed and variable costs.
Fixed costs include things like rent, mortgage payments, and car payments, while variable expenses include groceries, entertainment, and clothing. From there, you can see where you might be overspending and where you can cut back.
Habit #2: Cutting expenses
Once you have a budget, the next habit to develop is cutting expenses. This might mean making small changes, like bringing your lunch to work instead of eating out, or more significant changes, like downsizing your home or car. One way to make cutting expenses more manageable is to set goals for yourself. For example, you could aim to cut your grocery bill by 10% or your entertainment budget by 20%. By setting specific goals, you’ll have something to work towards and be more motivated to stick to your budget.
Habit #3: Increasing income
Cutting expenses is essential, but sometimes more is needed to get out of debt. That’s where habit #3 comes in: increasing your income. This could mean taking on a side job, freelancing, or starting a small business. But it could also mean looking for ways to earn more at your current job. This might mean asking for a raise or taking on additional responsibilities. Remember, the more income you have coming in, the easier it will be to pay off your debt.
Habit #4: Prioritising debt repayment
Once you have a budget, are cutting expenses, and have increased your income, it’s time to start prioritising debt repayment. One popular method for paying off debt is called the snowball method. This method involves paying off your smallest debt first, then moving on to the next smallest debt, and so on. Another method is called the avalanche method. With this method, you focus on paying off the debt with the highest interest rate first, then move on to the next highest interest rate, and so on. The most important thing is to choose the best method for you and stick with it.
Habit #5: Avoiding new debt
As you’re working to pay off your existing debt, avoiding taking on new debt is essential. This might mean avoiding credit cards altogether or using them only for emergencies. It also means setting up an emergency fund so that you’re less likely to rely on credit cards when unexpected expenses arise. Remember that every pound you spend on interest and fees is a pound that could be going towards paying off your debt.
Habit #6: Seeking support
Finally, seeking support as you work to get out of debt is important. This could mean talking to a financial advisor, joining a debt support group, or simply talking to friends and family about your goals. Having someone to hold you accountable and cheer you on can make all the difference.
Getting out of debt requires effort and commitment, but it’s possible with the right habits. By creating a budget, cutting expenses, increasing income, prioritising debt repayment, avoiding new debt, and seeking support, you can take control of your finances and achieve debt freedom. Remember, it’s essential to start small and be patient with yourself. Developing these habits takes time, but the results are worth it.
Photo Credits: Pexels
Tolu is a Money Coach and Content Creator, passionate about helping others break the payday-to-payday cycle and achieve their financial goals, through the power of intentional budgeting, saving and investing. When she’s not talking about money you can find her spending time with her 3 boisterous boys.