Drowning in debt? Here's how to swim your way out of it
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Every week we focus on strategies to create passive income and increase your wealth. But how do you get there if you are drowning in debt?
Here are ten top tips to help you bounce back fast!
1. Assess the damage
Go through your bank and credit card statements. Determine which budget categories were impacted and by how much. Don’t be tempted to skip this step. You can’t fix your financial woes until you define what they are.
2. Keep a money diary
Documenting your spending in a money diary will be an eye-opener. Understanding your spending habits will make you think critically about your spending in future.
3. Pay yourself first
You need savings to cover unexpected expenses. Move money to your savings automatically before you even see it. If you don’t currently save, start with 5%. Then add one percent monthly until you reach a minimum of 20%.
4. Return eligible items
Are there items you simply HAD to have because they were on sale? If you haven’t worn them yet, return them. Money will make you feel more empowered than any dress ever could. Did you receive unwanted gifts? Return them.
5. Find an accountability partner
Find a friend or ask your partner to keep you accountable. Agree on certain targets and a check in date. You will be less inclined to spend randomly when you know you must explain later!
6. Pay it off
Contact your bank to consolidate your debt into the account that offers the lowest interest rate. Instead of hiding from the problem, being upfront and honest about your situation will yield surprising results.
7. Take time to understand why you spent so much
Do some self-reflection and figure out what happened. Unless you address the root cause, your overspending is not going to stop. You’ll find yourself repeating these same steps over and over again.