A lot of people now are struggling financially because of the ongoing economic crisis not only in the U.S but a large part of Europe as well. And one of the culprits of this crisis is debt, both on the national as well as individual level. If you’re one of the persons who are burdened by too much debt, the following lists the top 5 ways which you can implement to totally clear your financial responsibilities.
Get rid of your credit card
Credit cards were designed not only for convenience but to provide an extended purchasing power for cardholders. But that added capability to spend is essentially translated to debt. If you’re using your credit card, you’re not really purchasing from the grocery or department store but you are borrowing financially from your credit card company.
There should nothing be wrong on the use of credit cards, unless when the cardholder is not responsible enough on his or her purchases and simply uses this plastic money anytime he or she wants. Instead of using credit cards, you should learn to revert back on paying cash.
Pay more than the minimum
You might think that your credit card issuer or other lending companies are gracious enough because they are allowing you to pay only a minimum percentage of the total amount due from you. This is not true. Although you are paying a minimal amount every month, it won’t do much help in clearing out that debt. This is because the remaining balance will still cost you a certain percentage of interest which will again added to your next month’s bill. So, if you are trying to pay-off or at least reduce those compounded debts, your monthly payments should be kept above the minimum.
Create and adhere to a financial budget
The main reason behind the creation and adherence to a budget is for you not to spend more than the amount you earn. After preparing a budget, you will notice that most of the “luxury” or non-essential items who are fond of purchasing before shall be eliminated. And if you really want to purchase some of these luxuries, you should first learn to save. Budgeting can be done mentally but writing your computations down to a piece of paper is recommended to visibly track your spending activities.
Augment your income
If you are struggling on paying your debt with your current salary or income, then you should find other means of augmenting or increasing the monthly earnings you get. You could do part-time jobs or businesses. Bulk of that added income should be dedicated in paying off your debts.
Start with the smallest and short-term debts
Examples of petty loans which have a short-term maturity date are payday loans, cash advances, personal loans etc. You should start paying off these smaller and short-term debts first than the larger and long-term ones. Why? Because short term debts especially those unsecured are the most expensive in terms of interests and penalties. A payday loan for example can cost you around 10-20% interest for just a short 1 month period while a vehicle or house mortgage is only at 6 to 12% per year.