Financial Confidence Blog

How To Get Out Of Debt On Your Own

Hi! I have been in a debt situation a few times myself and I know how hard it is to get out of it. I don’t mean kind of debt when you borrow money today and you will be able to give it back in a few days or a couple of weeks. I mean kind of debt which might take a few months or even years to get out of. It’s like a trap, and it wouldn’t disappear itself. You really need to do something to get out. And since I know it from my own experience, I can say that there is a big temptation to simply avoid the subject, to not think about the debt and just hope for the better times.

The reasons I hated to think about my debts were these:

– I was scared by my debt and I didn’t want to know the size of the problem
– I didn’t want to explain to the family how bad it is and feel guilty
– I didn’t want to change my habits

So, I was avoiding the subject for a while and didn’t want to even think about it. I was telling myself it is not too bad and I will eventually solve it. But it didn’t work for me, the debt didn’t go away, and I assume it doesn’t work in most of the cases. I started to get out of my debts only after I took a full control of the situation, I knew exactly how much I owe and I had to develop a clear plan to pay it off as quickly as possible. In this video I want to share my experience and a few ideas which I learned from others and which helped me to get out of debt. 

My strategy of becoming debt-free was to answer 3 simple questions and then act accordingly. Here are the questions:

– How big is my debt?
– How did I get into a debt?
– How do I get money to pay off my debt?

I know you want to go to the third question straight away 🙂 you can go like “come on man, don’t ask me how I got into a debt, just tell me how to get money!” But please don’t skip the first two questions, they are important 🙂 we will do through them quickly.

How big is your debt?

I know, the debt might be scary and you don’t want to realize how big it is. But don’t be afraid to calculate it. It will be very hard to get rid of debt unless you take a full control. You need to know how big is your debt to be able to develop a plan and calculate how much you need to pay monthly to pay it off. You may find out that you are not paying enough and that your debt is actually growing. If that’s the case you need to know as soon as possible to be able to stop it.

You might also find useful: The FASTEST Way To Pay Off Debt. How to manage and cope with multiple debts.

On the other hand, you may find out that your debt is really not that bad and it will bring a relief. My point is that you need to know exactly. Confront it and take a full control of the situation.

How did you get into a debt?

To be able to get out of debt we need to realise how did we get into it, so the situation doesn’t repeat again.

There are many reasons why someone can get into a debt. It might be because of the unexpected medical bills or some other unforeseen situations which you didn’t have a control of. They just happened and now you owe the money. But there might also be other reasons. Sometimes we spend more than we earn, we want to buy staff which we cannot afford. We use credit cards and go on minus without even realising it. These are all bad financial behaviours which get us into a trouble.

We need to understand that today’s market is created to make us consume more. They need to sell and they want to generate a demand. They make us want more than we really need. Even more, they gave us all the tools so we could make a purchase easily – we can buy online quickly, we can buy even if we don’t have the money, using the credit cards. Which is great, don’t get me wrong! It makes our life much easier. But we need to learn how to use all these tools without getting into trouble.

We need to get rid of bad financial behaviours and replace them with good financial habits:

– Don’t buy what you cannot afford. If you really want to buy it – find a side hustle and earn the money

– Use the credit card consciously. The balance on your credit card might look as if it is your money, but it’s not. If you spend it, you will go on minus and will have to give it back with the high interest rate

– Avoid hazard games and gambling, they are not created to make you reach. Don’t try to catch a quick luck. Even if you manage to make an easy money, it will go away as quickly as it came. It’s better to build your wealth slowly and learn how to manage your finances step by step – then your wealth will be much more sustainable. 

– Spend less than you earn – it’s a great financial habit which will keep you away from debt and help you to save money. Try to not spend everything, try to spend less. You should know exactly how much you earn and how much you spend.

– Create an emergency fund – you probably heard this advice a hundred times already. You need to have the money for at least 6 months of life without salary at your current level of spending. If you will lose the job or will have unexpected medical bills not covered by your insurance – this emergency fund will help you and save you a lot of stress. The majority of people struggle to create such fund, because they always have something more important. But I want to emphasise – don’t make any big purchases until you have a proper emergency fund. Don’t make a renovation, don’t buy a new car, don’t go for an expensive trip unless you have money for at least 6 months of living.

These are good financial habits that keep you away from debt. On the reverse side, if I don’t have these habits, it means I have bad financial behaviours. And most of the times, if people get into a big debt, it was probably because they were buying what they couldn’t afford, they didn’t control their credit card, they spend more than they earned, maybe hazard games or gambling were involved, or maybe they simply didn’t have an emergency fund when they needed it.

How do you get the money to pay off your debt?

When you know exactly how big is your debt, you can create a plan to see how much you need to pay monthly. By creating a plan, you will be able to know exactly when you will become debt-free. The important thing is that you earn enough to pay off your debt. Here are the few ideas where you can get the money to pay off your debt as quickly as possible:

– Sell staff you don’t need – this is one-time action, but it can help you to generate some money to start paying off. Check on the things you don’t need or don’t use very often – sell them on Ebay or Craigslist, or make a yard sale.

– Save money by cutting your spending. This will involve changing your habits, which is not easy. You might need to stop eating outside, stop going to gym or swimming pool, start using your bicycle more often, find a different way to make groceries, not buying branded clothes etc. You might feel like you are downgrading. But this is the price of your freedom and it is for good. You will be happy you did it.

– Earn more – it is important that you earn enough to pay off your debt. Anyway, the more you earn the quicker you will become debt-free, so it’s time to get a side hustle or find a better job. If you like your job, then it’s time to make extra efforts to get promoted. Educate yourself, take free courses and grow your competence to make your boss notice you and promote you.

You can also check: 10 Side Jobs To Make Extra Money

I hope you find this useful. In one of the next posts we will see how we can save money, so please stay tuned! 🙂 I wish you all the best, have a great week, and see you soon!

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