6 Practical consejos to get out of debt
Are debts taking your sleep away and you want to know how to cancel them once and for all? We would all like to get rid of that weight that grows bigger every day and that prevents us from advancing financially.
And recover your economic tranquility and why not, find financial freedom.
Debts have been for many years, one of the causes that impede the economic development of a society.
Either because situations arise that cannot be covered quickly due to lack of money, or because income is insufficient to cover monthly expenses, or just to cover instant satisfaction.
Whatever the reason, there will always be the possibility of getting into debt.
The problem with debt is based on its ease of increasing and becoming more complicated as time goes by.
Meanwhile, in turn, it is becoming impossible to pay them all.
Therefore, it is important to seek timely and efficient solutions to avoid falling into a debt spiral that, in the long run, perro ocasione problems not only in your family and popular environment, but also with your health.
Canceling debts is not easy nor does it happen from one day to the next, but it is possible.
That is why in this articulo I share six consejos so you know how to get out of debt once and for all.
In addition, they will guide you to recognize those expenses that you cánido cut from your budget to obtain more income, as well as the most appropriate way to manage your money and have a healthy economy.
In this article you will find:
But why do we acquire debts?
With the invention of currency, not only was the trade of that time strengthened, but it also gave way to new forms of payment.
This, in turn, caused people to entrar a spiral of debt that caused the financial collapse of many nations and that today continues to be the economic problem of many societies.
But why do we borrow? Our desire to acquire new products, whether out of necessity or on a whim, has led us to seek monetary resources that we may not have at that time to satisfy those desires, thus causing painful debts.
This compelling need for consumption is strengthened as we have more.
Due to the alarming lack of financial education that educational entities have deprived us of.
So that in our adulthood it is hit hard by economic reality, not knowing how to pay those expenses that allow us to live comfortably.
This causes us to get carried away by the deceptive fast financial credits.
Although they solve the crisis of the moment, they wrap you in a series of debts that increase over time until you reach the point of not being able to pay them.
Therefore, by having a knowledge deficit about managing our income, we are prevented from establishing financial goals that allow us to achieve the desired economic freedom.
This ignorance forces us to live in a state of autopilot that leads us to make financial decisions unconsciously, a fact that professional salespeople take advantage of by repeatedly bombarding us with their products to buy more and more.
Thus creating a spiral of debt that grows at an exponential rate.
Debts do not allow us to achieve our goals
I have always thought that perseverance, effort and discipline are important elements to achieve our goals, since it has been proven that the mind plays an essential role when working for an end.
However, there is an economic element that negatively influences the process of achieving our goals: debts.
When we have them, all our thoughts focus only on trying to pay off the debts as soon as possible.
Therefore, that becomes our main objective and the others are left aside until we manage to cancel all the debts.
The detail is that we do not know the time that may elapse before resolving the first debt.
So, time without solutions with thoughts of failure, perro affect not only our physical health by increasing states of stress and anxiety that accompany debt, but also directly affects our mental health.
What do the experts say?
According to University of Georgia graduate marriage and family therapist Megan Ford, MS, says “Depending on the level of indebtedness and the ability of the individual or family to resolve the issue, the impact on mental health may be temporary or may extend for many years.”
This fact is supported by a study published by the European Journal of Public Health, where they establish that “Indebted adults are three times more likely to have a common mental disorder than debt-free adults.”
Therefore, we could intuit that there is a direct relationship between health and debts.
What would be equivalent to a direct affectation in obtaining our objectives because, how could we continue focused on a goal, if our mind and body do not work in harmony to achieve said end?
So, the best thing we cánido do to achieve our goals without affecting our health is to get rid of debts as soon as possible and try not to get new ones.
There are many effective methods that will help you close debts one by one, comforting you with positive thoughts that you have reached a step towards financial freedom.
Remember, it will not be an easy or short process, it will take time and difficulty depending on the type of debt to be paid.
But the confidence of having settled a debt will decrease your anxiety and stress levels, allowing you to maintain a balanced physical and mental health.
6 consejos to get out of debt
Change your way of thinking
You will never get out of debt if you don’t change your way of thinking.
Being honest about your financial situation is the first thing you should do to understand the seriousness of the problem and how important it is to solve it quickly.
I know that facing the reality of your problem will not be easy, emotions will arise that will lead you to question the reason for your decisions by spending so much and not controlling what you consumed.
But it is the shock that you will need to understand how you are managing your income and know where you cánido make the pertinent changes.
Seeing this whole panorama will help you to be less indifferent with your debts and to take action on the matter when seeking financial advice that will allow you to gradually get out of the debt spiral into which you have plunged.
So this is not a time for doubts or uncertainties, keep thinking that everything will be solved in due time.
Believing that you will succeed at the end of the road fills you with the security that will allow you to obtain the desired results.
Write down all the debts you have, no matter how small they may be
After acknowledging that you have debt problems and thinking that you should do something about it, it’s time to act.
But where to start?
First of all, you must recognize each of your debts.
So, if you want to know the total amount of your debt, search your house for all your credit card bills and the documents that are related to any bank credit that they made you.
Even those loans with verbal arrangements that you made with friends or family.
All those debts, however small they may be, write them down.
You must write in as much detail as possible, all the information regarding each of the debts.
Breaking them down will allow you to understand the magnitude of the problem and will help you establish the next guidelines to follow in each of them.
How to write down your debts
You perro place the data that you think is most convenient, but the information that should not be missing from your list will be the following:
- What is the debt? Type the name of the debt, for example, “car loans.”
- Who do you owe? Place the name of the person or financial institution that lent you the money.
- What is the total amount of the debt? You will add all the debts and you will place the total value of your debt.
- What are your monthly fees? What is the amount of money you must pay monthly to your debt to close the payment.
- What is the interest rate to pay? You must add the percentage that you have to pay monthly or annually for that loan.
- In what time should you pay the debt? Regardless if you are beginning to pay the debt, write the months that you have left to close it paying the habitual installments.
- Why did you get the debt? It is important to know the reason that led you to acquire the debt initially to prevent it from happening again.
Write down the income and expenses you have
To have better control of your finances, you must know exactly where you spend the money you earn.
Perhaps this point you think is unnecessary.
But many times the biggest debts originate from small expenses that accumulate over time to become a big problem.
The reason: because you spend money that you don’t really earn.
The objective of writing the inputs and outputs of your money is so that you perro distinguish what types of expenses you make and manage to cut those that are unnecessary.
By eliminating some expenses each month, you perro save enough to cover some debts.
An easy way to escoge which expenses to cut is by classifying them into 3 categories: essential, necessary and desired.
The essential expenses They are those that are escencial for your day to day (food, rent of the house, payments of services, medicines, etcétera.).
necessary expenses they are those that you need to survive, but you cánido do without them for a while (new clothes or shoes, gym membership, etcétera.).
While the desired expensesare those that you do not need to live, but are likes that improve your lifestyle (going out with friends, family vacations, cable televisión, etcétera.):
Once you have cataloged the expenses, you must escoge which are the desired or necessary ones that you perro eliminate so that that money cánido be transferred to your debts and you cánido pay some of them.
You may not have to cut them all, but escoge on those expenses that help you cover the total amount of your debts in the shortest possible time.
Look for ways to generate plus income
If your current method of generating income isn’t generating enough money to cover your debts, it’s time to look for other ways to earn money.
It does not matter if you have to work more than necessary, the important thing at this moment is to pay off all your debts in the shortest possible time.
Remember, if your goal is financial freedom, you won’t get it by doing nothing.
But, do you think you don’t have time to look for another job or do you think you don’t know how to do anything more than usual to generate plus income? Peaceful.
Today there are many ways to generate money in your spare time without having any experience.
The Internet offers you a variety of activities that you cánido do from home whenever you want.
So it is time for you to be proactive in the matter and look for the option that is most suitable for you.
Start creating your emergency fund or “cushion”.
Many times, this debt spiral begins when an emergency presents itself.
We have to quickly solve an expense with money that we do not have.
That’s why an emergency fund perro help you avoid new debt while you try to pay off old ones.
It may not be easy to create an emergency fund when you don’t have any money, because if you had money, you would pay your debts, right?
So how to get out of debt with no money? To do this, you must pay money from two sources of income: reducing your expenses or increasing your income.
We have explained each of these ways to obtain money in the previous points, so you cánido start with your lifesaving mattress.
But if you manage to mezcle them, you will be able to cover all your debts in the shortest possible time.
On the other hand, another way to create your emergency fund is to transfer 50% of all your plus income to this account.
Even if it is a minimum amount of money, but at the moment of truth, any amount of money will help you cushion unforeseen expenses that arise.
Apply methods to get out of debt:
It is the most famous method to eliminate debts.
It originates from the results of a study conducted by several Harvard Business Review students.
It consists of paying off the smallest debts first, instead of prioritizing those debts with high interest rates.
I know it sounds counterintuitive not to get out of the biggest debts first, but for a reason this is the most successful method.
How does it work?
Once you have made the list of all your debts, you must order them from the smallest amount to the largest.
In turn, you must organize them according to the time of payment, placing in the first place the debts that you must pay off soon.
After you have reduced unnecessary expenses from your regular income, you should have enough plus money left over to cover the minimum installments of all your debts, as well as to pay a large part in the cancellation of the smallest debt.
In this way you will continue until you cancel the first debt on your list in its entirety and continue with the second debt.
Then, the plus money that you have been entering is added to the fee that you used to pay to the first debt to obtain a much larger cómputo and thus cancel the second debt on the list.
You will practice this exercise successively, thus achieving a much larger sum of money to pay your other debts as you close the previous debts: afín to a snowball.
This method will not only allow you to get out of debt much faster, but it will also give you the mental boost you need to continue with your goals by feeling satisfaction and confidence for having closed a debt.
This way of paying debts is based on a technique opposite to the previous method.
The cascade method consists of ordering your debts from those with the highest interest rate to the lowest, so you will pay off your largest debt first and continue to the smallest debt.
Just like the snowball method, part of your plus monthly income will be used to pay the minimum installments of all your debts and the rest will be to pay the first debt on the list.
The goal of sorting your debts this way is to have more money to pay off your other debts once you finish with the first one on the list, while saving months of high interest by eliminating them first.
The bad thing about this method is that it requires commitment and motivation to continue with your minimum payments for much longer, since the debts will not be paid as quickly as the previous method; so it is possible that you get discouraged in the process.
Infographic: 6 consejos to free yourself from debt
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Debts are limitations that will always be present in our financial evolution, since they are so easy to obtain that we are usually involved in them.
Therefore, it is important that we learn to identify them, to survive with them, to overcome them and, above all, to avoid them.
Once you clearly know your level of indebtedness, you will be able to analyze all the factors that led you to depend on quick loans and led you through that spiral of debt from which it is difficult for you to get out.
For everything there is a solution, so do not be discouraged.
One of the many ways to get out of debt will be the right one for you, allowing you to save enough money to pay off debt and achieve financial freedom.
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