Debt is a pretty scary word, right? It makes most of us think of repo guys, not being able to feed our families, and just general despair. However, burying your head in the sand is not going to get you out of debt. Here are the five simplest steps ever to start you on the path to a debt-free life.
Step 1: Write a list
First up, you need to work out how much you owe, and to who. This may be one of the most difficult steps if you’ve been avoiding things for too long. Get together any statements and bills you have, and write everything down on paper. You’ll then be able to work out exactly how much money you’re going to need, to get out of debt. It may only be a small amount, in which case you’ll feel relieved. It may be a large amount, but don’t stick your head back in the sand as that amount will only get bigger.
Step 2: Put them in order
Now you have a list written up; it is time to put all of your debts in order of importance. At the top of your list should always be debts that could lose you your home; rent, mortgage or loans secured against your property. Next up should be taxes and utilities. After that comes credit card bills and loans. Finally, any other bills and money you owe to friends or family members. You now have a priorities list!
Step 3: Budget
Your next step involves putting together a budget. Work out exactly how much you have coming in and how much goes out. By working out your income and expenses, you’ll see what you have left over to pay off debts. You may find that some companies you owe money to will want to see a copy of your budget, too. Take a look through your expenses and see if there’s anything you can cut down on, to spare up some extra cash.
Step 4: Get in contact
Now you know exactly how much money you have left at the end of each month, you need to get in touch with anyone you are in debt with. Explain your situation and that you can afford to pay back a certain amount per month. Most will be happy to sort out a repayment plan with you. There are also options like Reliance Tax Loans which will help make some of the more important debts easier to deal with.
Step 5: Stick to your plan
You should now have a strict budget to follow and repayment plans with all of those you owe money to. All you have to do now is stick to the plan. Keep making those monthly repayments and following your budget stringently. You may even want to look at ways of bringing in a bit of extra income, to pay everyone back faster.
Before you know it you’ll have made a huge dent in that first figure and will be well on your way to a debt-free life. All because you stopped putting your head in the sand!