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Coming Back From the Debt Trench? 5 Ways to Do So

Coming Back From the Debt Trench? 5 Ways to Do So

There are different reasons for why a person might submerge himself/herself into debt—a sudden death in the family, loss of job and income, worsening health conditions, going through a divorce, and so on. Even without these unfortunate circumstances befalling a person, they may still get into a seemingly endless trench of debt thanks to the inability to manage cash wisely and the lack of discipline. Fortunately, it’s never too late to rescue yourself from the financially gloomy position you’ve put yourself in. Here are five ways to make a financial comeback from your debt trench.

Know Your Options

Knowing what your options are can drastically affect the outcome. Being limited with only one option can impede your progress of achieving the goal, which ultimately is to get out of that proverbial hole. Recovering from debt generally has three possible solutions: pay off any outstanding accounts, settle it, or file for bankruptcy. The latter, obviously, is something you should only consider if worse comes to worst. Debtors basically start to build a new credit profile within 24 months of settling their last unpaid account/s. The amount of time to recover from any of the three debt relief options will vary.

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Create a New Budget Plan

If you had a previous budget plan before you got yourself into financial debt, it’s time to wipe the slate clean and create a new budget plan that will fit your present circumstance and future financial goals. Write up a list of monthly expenses and compare it to your income. Take into account unforeseeable expenses into the monthly budget plan to cushion future financial blows. Include recurring expenses, such as therapy sessions and medication.

Trim the Fat

Proactively seek to lower monthly expenses. Cancelling magazine or channel subscriptions can free up substantial cash that can be used to repay outstanding debt and possibly grow passive income in the form of interest. Other ways you can trim expenses is to switch to generic store brands instead of pricier gourmet brands. Keep in mind that your lifestyle doesn’t have to take a drastic step back just so you can have more savings. Conducting extensive research and making regular self-assessments can continuously reduce expenses.

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Boost Your Credit Score

Poor credit score leads to higher loan interest rates or even rejected loan applications. A rejection from traditional loan options will force you to take on less conventional credit lines, like payday loans, which only give you more debt to worry about in the future. Boost your credit score through proactive monitoring or by signing up for a credit monitoring service. Check your credit reports and dispute any inaccuracies that may be impeding your credit repair goals.

Capitalize on the Right Credit Tools

Debt isn’t always a bad thing. Some debt options can work to your advantage if intelligently utilized. For instance, applying for a secured credit card instead of a traditional credit card gives you a safer line of credit in the event that you cannot pay the principal amount.

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With a secured credit card, you give the lender a security deposit in exchange for a line of credit. If you default on the credit payments, the lender takes the cash from your security deposit thus limiting the effects to your credit score.

Coming back from debt can seem like an insurmountable challenge, but with the help of these five tips, you’ll be able to gradually improve your financial situation while also permitting yourself to a healthy and normal financial lifestyle.

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Try these tips out and let me know what you think. What other steps do you recommend in dealing with debt?

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Kevin Faber

CEO Silver Summit

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Last Updated on January 21, 2020

How to Develop a Millionaire Mindset in 6 Simple Steps

How to Develop a Millionaire Mindset in 6 Simple Steps

We all like to dream about being financially wealthy. For most people though, it remains a dream and nothing more. Why is that?

It’s because most people don’t set their mind to achieving that goal. They might not be happy in their current situation but they’re comfortable – and comfort is one of the biggest enemies of growth.

How do you go about developing that millionaire mindset? By following these simple steps:

1. Focus On What You Want – And Take It!

So many people are too timid to admit they want something and go for it. When there is something that you want to accomplish don’t think “I could never actually do that”, think “I could do that and I WILL do that”.

Millionaires play to win, not to avoid defeat.

This doesn’t mean to have to become a selfish jerk. What it means is becoming more assertive and honest with yourself. You don’t have to grab off other people. There is a big pot of unclaimed gold in the middle of the table — why shouldn’t you be the one to claim it? You deserve it!

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2. Become Goal-Orientated

It’s almost impossible to achieve anything if you don’t set firm goals. Only lottery winners become millionaires overnight. By setting yourself attainable goals, you will get there eventually. Don’t try to get rich quickly — get rich slowly.

Let’s take the idea of making your first million dollars and expand on what kind of goals you might set to get there. Let’s also say you’re starting at a break-even position – you’re making enough to get by with a few luxuries, but nothing more.

Your goal for the first year can be having $10,000 in the bank within a year. It won’t be easy but it is doable. Next, you need to figure out the steps you need to take to achieve that goal.

Always look at ways to make growth before cutbacks. With that in mind, you might want to see if you can negotiate a pay rise with your boss, or if there’s another job out there that will pay better. You might be comfortable in your old job but remember, comfort stunts growth.

You may also have other skills outside of your workplace that you can monetize to boost your bank balance. Maybe you can design websites for people, at a fee of course, or make alterations to clothes.

If this is still not enough to make the money you need to save $10,000 in a year, then it’s time to look at cutbacks. Do you have a bunch of old junk that someone else might love? Sell it! Do you really need to spend $10 on your lunch everyday when you could make your own for a fraction of the cost?

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If you are to become a millionaire, you need to start accumulating money.

Here’re some tips to help you: How to Become Goal Oriented and Achieve More in Life

3. Don’t Spend Your Money – Invest It

The reason you need to accumulate money is for step three. Millionaires tend to be frugal people, and that’s because they know the true value of money is in investing. Being your own boss goes hand-in-hand with becoming a millionaire. You’ll want to quit your regular job at some point.

Stop working for your money and make your money work for you.

Rather than buying yourself a new iPad, that $500 could be used to invest in the stock market. Find the right shares (more on that later), and that money could easily double within a year.

There’s not just the stock market — there’s also property, and your own education.

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4. Never Stop Learning

The best thing you can invest in is yourself.

Once most people leave the education system, they think their learning days are over. Well theirs might be, but yours shouldn’t be. Successful people continually learn and adapt.

Billionaire Warren Buffet estimates that he read at least 100 books on investing before he turned twenty. Most people never read another book after they’ve left school. Who would you rather be?

Learn everything you can about how economics works, how the stocks markets work, how they trend.

Learn new skills. If you have an interest in it, learn everything you can about it. You’d be surprised at how often, seemingly useless skills, can become extremely useful in the right situation.

Start developing the habit of learning continuously: How to Create a Habit of Continuous Learning for a Better You

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5. Think Big

While I advise to start off with small goals, you absolutely should have a big goal in mind. If you have a business idea, then that is your ultimate goal – to start that business and make a success of it. If you want to invest your way to millions of dollars and do little work other than research, then that is your big goal.

There is no shame in not achieving a big goal. If you run a business and aim to make $1 million profit in a year and “only” make $200,000, then you’re still significantly ahead of most people.

Aim for the stars, if you fail you’ll still be over the moon.

6. Enjoy the Attention

To be successful, you have to be willing to promote yourself and enjoy the attention to a certain extent. Now the attention doesn’t need to be on yourself, it could be on your brand, but attention definitely attracts money.

Never be embarrassed to get your name out there. That means finding a spotlight and being brave enough to step right up underneath it.

If you run a business, try contacting the local papers. You’d be surprised at how amenable they often are to running a story about you and your business, and it’s all free publicity.

Above all, remember: You control your own destiny. Push hard enough for anything and you’ll get it.

More About Thinking Smart

Featured photo credit: Austin Distel via unsplash.com

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