Excessive debt can be a burden that can affect the quality of your life. The credit crunch is not just affecting low earners, rather debt burden is hurting us all. Due to this adding debt, saving is nearly impossible. The concept of saving before paying high interest debt is not feasible in financial terms.
Hence, it is advisable to get out of debt first before saving money for your emergency funds. Following debt repayment tips can help you manage your debt and save substantial amount every month.
Stop going more in to debt: To first step in debt repayment is to stop adding more debt in to the existing debt amount. Create a realistic budget that includes everything from rent to food to vehicle expenses and additional expenses, and spend under your monthly income. Check spending patterns of yours as well as your family, and try to stay under the set monthly budget. Once you control the money outflow, you will be able to save money and repay your debt.
Make debt management plans: Find out how much you owe to each credit card, loan or bill, and make note of the interest rates and deadlines of each bill and loan. This will help you to prioritize which bills to pay off first, as interest rates may vary according to the bank that has offered the loan and the type of loan you have taken.
Use more cash: Keep your credit cards aside and start paying in cash. This will keep a tab on the discretionary spending, as you are less likely to buy things that are out of your budget. Keep your credit card only for emergencies and carry cash everywhere. This will ensure you spend wisely and only on necessary items.
Switch to lower interest rate: You can obtain loan at a low interest rate to pay off your existing high interest debt. Interest rate arbitration can reduce your interest rates and monthly payments.
Make sure you check all the refinancing costs before switching your interest rates. At times, it may cost you more.
Trim unnecessary spending: Find a way to reduce your expenses on dinners, overseas vacations, clothing or other unrequired expensive items. This will help you save extra money every month that you can use to pay debt and become debt-free.
Pay larger or more regular payments on your loan: Pay more than minimum every month so that the duration of repaying debt as well as the interest of repaying is reduced. Always pay off as much as possibly you can. Make a few sacrifices from your personal shopping and pay extra bucks till you repay your total amount. These small sacrifices can help you repay your debt faster so that you can come out of the debt hole.
Getting out of debt and saving money does not mean you stop living, completely. It is just about making smarter choices so that you can repay your debt. The sooner you pay off your debts, the sooner you can start beginning saving for your emergency or retirement funds.