Debt: It’s Time to End It

Most people who are in debt have a hard time finding a way out of this big problem. There does not seem to be a light at the end of the tunnel. And an even worse thing happens: everything they do ends up making the situation even worse. The hole gets bigger and bigger! Where is the error? It is lacking in planning . In these cases, people are not solving the problem, but trying to put out the fires caused by the debt wheel.

The first step is to raise all your debt.

The first step is to raise all your debt.

Where do I owe (a store, a bank, a finance company or a relative), what type of debt (loan, overdue, overdue account, overdraft, credit card or overdraft) and most importantly, what is the interest rate that is correcting that debt. If you want, make a table of all this survey. It is a way for you to visualize the size of your problem and then analyze the alternatives to solve it.

The second step is to review your home budget.

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Almost all debts are the result of a budget imbalance process. We spend more than we earn and we complement it with debt. It’s a snowball that starts small but suddenly has no control downhill.

If you don’t have a budget yet, it’s time to start making yours! In budget review, we should also look to see what expenses we can temporarily cut or eliminate . This amount that can be left over will be important for the debt settlement. The next step is to see if you have any financial reserves.  But how can someone in debt have any money saved?

This is more common than you might think.

This is more common than you might think.

One is saving money to buy a car, for example. And he says he doesn’t touch that money under any circumstances. And for some other circumstance, it ends up in debt. As a result, she pays a monstrous interest rate (overdraft interest rates are as high as 10% per month) on her debt and receives a return on her saved money that is far from 1% per month.

In summary, every month this person loses a lot of money that could be saved for buying their car. So if you have any money saved, use it to pay off or reduce your debt and rebalance the situation, save even more.

After all this, the most important step is to start settling the debts. One way out may be to replace all your debt with cheaper debt. And how is that done? A person who owes the overdraft and credit card (two of the highest interest rates) can go to his bank and make a personal credit line (which has lower interest rates). The important thing is that the new installment assumed is no more than your budget allows.

Another way out is to pay off debts little by little. I must first choose the ones that have the highest interest rates. By wanting to repay a debt, you have good power with your creditors. And you can enjoy it to your advantage. Each hit should never compromise your budget.