Before learning how to get out of debt, you must understand a series of realities that will not only prevent you from getting into debt again but will give you an understanding of the new economic reality in which we live.
Believe it or not, there are good debts. They are those that although they generate a cost to you (that is, you have to pay interest for that money), this capital you have invested in some asset which produces profitability higher than the cost that you must pay, or in simple words, the interest that defined the lender.
In this article, we are not going to explain how to get out of good debts, since these serve as leverage for a new business, an investment in real estate or to create a source of income.
In this guide, we will not only explain how to get out of debts that you have acquired to maintain your lifestyle, buying things that you no longer remember, traveling at inopportune moments, and other unnecessary expenses that impoverish you without realizing it.
We will also address a series of tips that will prevent you from acquiring debts in the first place.
These range from credit cards, personal loans you do not need, bank loans at high rates, or in recent cases, financing from family and friends.
Before leaving your debts, keep in mind the following information:
Nowadays young adults, those between 18 and 24, are graduating later, starting their professional careers then, getting married later, having children then.
You are starting to save your money later.
In 2009, only 20% of people between 18 and 24 were unemployed or underemployed. However, over the years, this figure has been increased to reach 50% today.
If you add about five years to obtain a university degree, in addition to the thousands of dollars of loan that you need to be able to pay for the university, for sure and you will have a problem.
This reality has put the maturity of young adults at the lowest point of all time and their debts at the highest end in history.
Based on this new scenario, it is not only essential that you learn how to get out of debt, but that you decide to lead a debt-free life in the first place.
And while it is a decision that involves taking great sacrifices, it will be worth it in the future, when you can enjoy your financial freedom, regardless of the money you are billing.
How to get out of debt quickly without affecting your lifestyle:
If you find yourself in debt, the first thing you should do is leave the commercial space in which you find yourself before thinking about expenses that do not generate income or trying to pretend that you lead an enviable lifestyle.
Here are ten steps to learn how to get out of debt quickly.
- Allocate 30% of your income to cover your debts:
While you can allocate a higher percentage, it makes no sense to stop living while paying your debts.
It can indeed take a little longer when you only allocate 30%, but remember that you have other maintenance expenses such as housing, food, family, among others.
You must learn how to manage your money if you want to get out of your debts.
- Organize your debts in order of interest rates:
If you want to learn how to get out of debt quickly, pay for those commitments that involve a higher cost.
As well? Pay off the debts that have a higher interest first. In this way, you will prevent the importance of accumulating, and your debt seems like it will never end.
What you must do is classify your debts on an excel sheet or blank paper, and according to the annual or monthly interest rate, you are going to organize your debts from highest to lowest.
First of all, the one with the highest interest rate will go, and this will become your number one priority. Once you finish paying, continue with the next one and so on.
- Don’t just pay interest, make payments to capital:
Benefits are the manifestation, but they are not the root of your financial problems. The problem is that you are not reducing the base on which you are charged interest.
That is if you owe 100 dollars and they charge you an interest of $ 5 per month, and the only thing you do, month by month, is to take out the 5 dollars from your wallet, you will never pay your debt.
The payments to the capital are that extra money that you give so that the base, or the capital, that is to say, the 100 dollars of the example, is reduced and therefore, the interests also.
In the case that you decide to make a capital contribution to your debt with the bank, you have two options:
The first is to reduce the amount of the fee, that is to say, that you pay less; or reduce the time of the loan, which implies that you continue paying the same but for less time.
- Return your credit cards:
These plastics is an incredible financing tool, as long as you learn how to use credit cards.
If you use your credit card to maintain your lifestyle, be sure that you will never learn how to get out of debt. Why? Credit cards have one of the most expensive interest rates in the market.
Depending on the country in which you are, this rate may vary. According to the newspaper El Financier, the prices in Latin America are between 25% and 40%, except Brazil, whose rate has reached up to 400% annual cash.
For more information about debt settlement or payday loan debt settlement you can visit on online expert.