Five Step Program to Come Out of Debt
There are many ways to come out of debt, and each one caters to a person’s individual circumstances. If have some major debt to pay and have no idea of how to go about it then this five step program can guide you in managing your finances in a better way. You can customize this program to suit your personal financial situation.
- Making a finance management plan –Firstly, you need to admit that there is a problem with the finances, when you realize this thing and when you acknowledge this problem, you can make a finance management plan that will slowly but surely help you in coming out of debt.
You need to put an end to non-essential spending for at least a month initially. Non-essential items can be luxury items like DVDs, expensive gadgets or clothing or footwear items and will spend only for essential items such as utility bills, groceries, housing etc.
- Small cutbacks in everyday routine – Examine your regular expenditures and make small cutbacks in your daily routine. For instance- Packing lunch to work rather than spending everyday 7$ to 8$ dollars in buying fast food. Making dinner or coffee at home instead of going to an expensive coffee shop or an eating joint nearby. By the end of month you will realize, these peanut-sized penny savings will dramatically save a great deal of money.
- Save for Emergency – When you start saving, next step is to set up a savings account. The amount of money you save from small cutbacks need to be deposited into this savings account. Make sure each month you are transferring this amount to your account so that you save a good amount gradually into that account. This can serve as a small emergency fund for you, so in case something unexpected comes up, it does not affects your pace of debt payments.
- Chalking out a Spending Plan – The way you have created a saving plan, you need to chalk out a spending plan too. In this plan, you can differentiate between your fixed-monthly expenses such as Home, Car, and Cable etc. Then mention about your variable expenses that tend to differ each month like groceries, gas etc. In addition, also take note of irregular expenses such as Home maintenance, Car maintenance and other maintenance charges that may only appear every few months.
- Additional Income – To get out of debt faster, another way is apart from your regular income, look for some options to make some additional income. You can consider taking up a part-time job, or make use of your talents to freelance some work like painting, writing, designing or any other talent you possess. Ensure additional money you make is automatically applies to your pay off your debts.