A lot of people are struggling with their debt. About 80 percent of Americans have debt of some kind. Of course, not all these debts are of the same quality or quantity. Nonetheless, debt is a serious obligation that needs to be treated as such. If you’ve found yourself in a tricky financial situation because of debt, don’t wait around to do something about it. Here are some strategies for repairing your personal finances before things get out of control.
Create an All-Inclusive Budget
Budgeting your money is one of the best ways to get your finances back in order. Not only will you get a clearer picture of where you’re spending your income, you’ll start to see the areas that need the most improvement. Here’s what you’ll need to do in order to create a workable budget:
- Compile all your financial information. This will include any credit card balances, long-term debt such as a mortgage, rent costs, insurance, and utilities. You’ll also want to include more frivolous expenditures, like memberships and subscriptions, receipts from dining out, and other purchases. You want to include every expense when you’re doing this, otherwise you won’t get accurate results.
- Total up all your monthly spending, then subtract it from your total monthly income. This will show you exactly how much you’re in the black (or red) each month.
- Separate you expenses between necessary expenditures (rent, insurance, utilities) and non-essentials (eating out, luxury items, entertainment). Itemizing your spending this way will make it easier to figure out where you can cut out some fat.
Reduce Your Expenses
You aren’t going to be able to fix your finances without making a few concessions. This doesn’t mean you can’t do anything to enjoy yourself. However, you really need to consider what is and what isn’t necessary. Do you have any redundant expenses? For instance, do you use multiple video streaming platforms, plus cable? Consider cancelling some of these, especially the ones you use with the least frequency.
Dining out is another expense that goes under the radar for a lot of people. The average household in the U.S. spends over $3,000 per year on restaurants and the like. It costs about half as much—or less—to make food at home. This will save you a lot of money over time.
Calculate Interest Ahead of Time
Interest, believe it or not, can make turn your financial situation sour if you aren’t careful. This is especially true with credit card debt, which typically compounds interest. Remember, you’re not just paying for your original debt, but also interest on your interest. This can quickly spiral out of control if the interest rate is high and you’re only paying the minimum each month. Try to prioritize paying off your full debt on high-interest accounts. This will greatly reduce the amount you owe in the long run.
Get Help from People You Can Trust
Don’t be afraid to ask for help. It could be what you need to turn around your financial situation. It’s possible a family member or friend will be able to lend you money at a low or zero-interest rate. This can give you the much-needed support to pay off your swelling loans. Just make sure you actually pay them back or it could end up damaging your relationship.
You should also look into debt relief services if you are wrestling with your debt. Freedom Debt Relief is one of the most respected players in this industry, and has helped tons of people get out of tough financial situations. These Freedom Debt Relief Reviews from TrustPilot really say it all. People are overwhelmingly pleased with the assistance they’ve received from this organization. Many of their customers even get rid of their debt entirely in as little as 24-48 months. Whether you engage with debt relief services is up to you, but if your financial situation is getting out of hand, it might be helpful to look into.
Figure Out If You Can Sell Some Possessions
Not all cases are the same, but many people find themselves in turbulent financial waters because they buy too much stuff. While you might not want to do this, selling some of your material possessions is a great way to generate cash. Do you have some kind of collectibles sitting around? See what you can get for them. It’s a much better idea to sell on eBay or Craigslist than bring items to a pawn shop, where you’ll get a lower offer. Selling unnecessary items opens up storage space and can give you cash flow to tackle your monthly expenses.
It’s definitely easier to get into debt than to get out of it. But it’s by no means an impossible undertaking. With a little bit of discipline, and by taking the right approach, you can repair your financial situation.