A recent report by the Federal Reserve Bank of New York reveals that the consumer debt in our country has hit a record $14.3 trillion in the first quarter of this year. Isn’t it shocking?
Having debts means most likely, you have to sacrifice a substantial amount of your paycheck to pay them off. Eventually, you might be left with little or no funds to save for your future. It’s time to get pretty serious about your debts and get rid of them. That’s why we have listed some of the best possible financial goals that can help you to destroy debt.
Let’s start!
1. Feel financially secure by planning a realistic budget.
A budget is considered as a stepping stone to your financially secure life. Without a budget, it’s quite impossible to track your dollars. And if you don’t know where your dollars are going, you are likely gonna overspend.
Eventually, you will run out of funds and you may have to take out a loan for your money needs. And if this becomes your habit, you are likely to live paycheck to paycheck and ultimately, debt trapped.
Plan your budget asap. You just need a pen and paper. List all your expenses and write your monthly income from all sources.
Then chalk out a budget to cut down your expenses and thereby stop overspending. Also, make sure you are saving money for your own good like for your retirement, emergency fund, etc. Following a budget can help you to trim your expenses to a great extent. And you can utilize that money to destroy your debts asap!
2. Create an emergency fund.
The coronavirus pandemic has made us realize that emergency funds are an integral part of our financial lives. Many people in our country have lost their jobs and they are claiming unemployment benefits. And during this time, many people are falling prey to the fast cash options like payday loans. You might know that payday loans have high-interest rates along with other charges. And the high-interest rates and stringent terms and conditions make it cumbersome to pay off payday loans.
In this situation, the emergency fund plays an important role. You can utilize your emergency fund for your basic needs for a few months. We can’t predict our future. Just think, who knew that coronavirus would come and devastate our lives? That’s why you should be prepared to face any exigency. At least if you are financially prepared, you can deal with the situation in a better way.
Financial experts often suggest that one should have an emergency fund consisting of his/her expenses of 4 to 5 months, and it's going to be a huge amount of money. But if you start saving a certain amount every month, you will be able to create a substantial emergency fund within some time.
3. Look for strategic ways to pay off your debts.
Are you trying to destroy your debts faster? If yes, you need to look for strategic ways of doing it. Yes, you heard it right!
Let’s say, you are having multiple credit card debts. And you are exhausted in managing your multiple debts. Besides, as a credit card is an unsecured debt, it has high annual percentage rates (APRs). And this makes credit card debt more cumbersome to pay off. Now, how about the fact that you can pay off your debts by making a single payment every month and that too with lower interest rates? Seems impossible? Well, it’s not!
This process is called a debt consolidation program. For that, you need to approach a genuine debt consolidation company. At first, they will assess your debts along with your financial situation. Based on this information, they will suggest a monthly payment plan which you can afford. Besides, they will try to negotiate with your creditors to reduce the high APRs. Once they agree, you can start making single payments every month (with reduced APRs) to the consolidation company. And in turn, they will distribute the money among your creditors based on your debt amounts. However, you need to pay charges to the consolidation company for availing the services. To find the best debt consolidation services, check whether or not it is accredited by Better Business Bureau (BBB) and go through the reviews! Besides, if possible, ask your friends, family members if they can suggest a good debt consolidation company!
4. Find various ways of making money
This is basically called a side hustle. A side hustle is a source of a passive income you can earn in your free time (without affecting your full-time job). With time, more and more people are opting for side hustles. And probably, that’s why the gig economy in our country is gradually rising. Our suggestion for you is to make your passion as your side hustle. Firstly, it will make you feel good that you are doing something for yourself. Secondly, it will help you to earn some extra bucks that you can use to destroy your debts faster. And once you become debt-free, you can save those dollars for your future.
The bottom line is, you need to set proper financial goals to destroy your debt. And thereby, you don’t need to sacrifice a substantial amount of your paycheck. Eventually, you can save money for your bright future and plan for your financial freedom as well.