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5 Steps that Will Help You Cope with Your Debt

5 Steps that Will Help You Cope with Your Debt

There is an old saying that goes something like this “He who goes borrowing, goes sorrowing”, and I couldn’t agree more. In the good old days, borrowing was considered the last resort for a person in need, but nowadays it seems that everybody has some sort of debt, no matter how small. Our society is built upon the idea of credits and loans and the more you take, the more you need. The more you have, the more you want. And no matter what we do, we end up paying the price, sometimes for years. Chances are that at some point, some fancy guy in a suit will knock on your door and take everything you have. Luckily, all problems have solutions. So in order to get out of debt, or at least limit your debt, there are 5 steps that must be taken.

Step #1: Make Your Problems Your Priorities

It doesn’t matter if you work for a minimum wage or earn a decent living. With all these temptations, it is hard to stop getting loans and credits. The truth is that debts have become a normal part of our lives according to recent studies, and we are more often than not tempted to take on more than we can handle.

And although there is nothing more rewarding than standing on your own two feet, it is hard to do it with no debt whatsoever. College life is expensive, so you choose a student loan. Then, you want your own apartment or house, you get married, you have kids, you need cars and a change into the household appliances every now and then. And many people don’t get rich overnight, nor do they win the lottery or land on a gold mine. So credits and loans are the only solution to lead a normal life, like everyone else. But unless you want to spend the rest of your life paying interest, and worrying about your overdo payment, you have to take steps to dissolving your debt. Make the clearing of all your unresolved financial issues a top priority, and no matter what interference might occur, stick to your plan.

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Step #2: Stop Spending Your Money on Useless Stuff

It isn’t easy to embrace the frugal lifestyle, but nowadays there are so many resources and living examples of people who did it and who are living a care-free life, that you can’t be scared of trying it yourself. You know the saying “less is more”, so try applying it in your own life. Do you really need to buy all the junk you find in stores? I know you love chocolate, and you’re craving for a dinner out in the town, but you should focus on things that actually matter if you ever want to start moving forward. And it’s not a matter of giving up, it is a matter of simply clearing that cloudy sky and making a difference in your lifestyle, by creating balance. Balance leads to well-being.

Plus, you’d be amazed at how much money you can save if you put a little effort into it. Here is an idea to experiment: every time you go into the supermarket, try to think if you really need a certain item, and if you don’t, put the amount of money you would have spent on it somewhere else. Check that little deposit in a few weeks. And smile.

Step #3: Dealing with the Reality of Debt

If you accepted the fact that you have a debt problem and that you have to stop spending money on things that lack importance, the next step is to actually deal with the reality of debt. This means understanding the fact that although the bank may be offering you loans and credits for personal needs or for business needs, it certainly does not hold back from taking it all away when payments are not made in time. You go from wanting it all to losing even the little you had.

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There are many online resources and finance blogs that can advise you how exactly to deal with your debt in your country and which debt tools to make use of. In Australia, for example, debtconsolidation.com.au shows us that consolidation tools such are repayment are the most preferred ones. A repayment plan of your home loan would look like this:

    In other countries, people prefer to make one big loan, so they can cover all the other small ones.The most important focus of this strategy is that you will no longer risk missing payments and getting into more problems, because there is only one big problem that you have to worry about. It might sound a bit harsh, but having just one problem to deal with can be a life saver.

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    Step #4: Write Everything Down, Keep a Check List and Open a Savings Account

    It may not sound like the best advice, but writing down all your costs and profits will significantly help you manage your money. How exactly, you might wonder? It is simple: if you are diligent, and never forget to write everything in a notebook, you will be able to make a grand total at the end of the month/week, and see exactly what it is that is burning a hole through your pockets. To add more, try keeping things organized in a check list, so that you know what is a must and what can be saved for later. Organizing your spending budget is a key part in preventing new unwanted debts.

    Remember, we want to deal with each problem at a time, so preventing unwanted problems is also a smart way of living. Each time you managed to do something, even if it is just a simple action as to giving back some borrowed money, check list it. But what about holidays and expenses? Well, open up a savings account. Be it for Easter, Christmas, or other holidays and birthdays. It’s better to plan ahead. So if you want to spend some money, but not over do it, then this is the answer. Wondering what to do and where to “cut” from, so you can save money? Scroll up to Step 1 and read the experiment suggestion again and then come back to Step 5. Now you know where to start.

    Additional Pieces of Advice

    1. Never Give Up

    It takes a few weeks to get into serious debts, but you might be paying for this mistake your entire life. Nevertheless, if you have found yourself in a truly dire situation, where everything looks as though it could come crashing down in the blink of an eye, try to remain calm. Put your patience hat on, stay strong, and try to make the best out of what you have.

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    2. Stay Positive

    Optimism is the key to give peace to our minds. Nothing good will come out of stressing yourself. Remember that important lesson in math class: every problem has a solution. Stay focused and find it through creative realistic ways. But before that, keep your mind sane, so that it functions to its full potential.

    3. Carefully Choose Your Words and Your Actions

    Think, before talking and acting. Your actions can have side effects on your happiness and on the happiness of your dear ones. There are so many people who are consumed by their financial issues and still fail to understand that money does not bring happiness and luckily, there still are plenty of things money can’t buy.

    Word of advice: never joke around or say “I am forever in your debt” to a bank representative. He might take your word on that one.

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    Last Updated on March 4, 2019

    How to Use Credit Cards While Staying Out of Debt

    How to Use Credit Cards While Staying Out of Debt

    Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

    I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

    Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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    Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

    Do Not Treat Credit Cards as Your Funding Sources

    Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

    I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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    I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

    If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

    Make Sure to Always Pay Off Balances in Full Each Month

    The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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    Using Credit Cards with Rewards

    Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

    You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

    I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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    So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

    What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

    Featured photo credit: Artem Bali via unsplash.com

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