You might be wondering why are we even in debt but in life, most of us will be getting loans to make purchases on things like houses, cars, or even for your business. If we are not careful enough about loans, we might end up in a hell where we have to work our ass off and never be able to clear all our debts. We should look to get out of debt as fast as possible to achieve financial freedom.
- Sell Things That You Don’t Need
For me, there are a lot of things that are just lying in my house and I hardly ever use them. These things can be put up online for sale and you will be able to get some money to pay off your debts.
For example, if you have an Xbox One sitting in your house but you no longer play it, you can consider selling it and getting a good $200 back for the console. That $200 can already take care of your debt repayment for the month.
- Budget Your Spendings
As a general rule of thumb, you should be targeting to at least follow the 50/30/20 rule. 50 percent of your income will go to your expenses such as food, transportation, and other bills. 30 percent of your income will go to your wants such as maybe your shoes are worn out and you have to get a new one. Lastly, the remaining 20 percent of your income shall be used to pay loans and also for your savings.
You should start calculating your income and make a plan for yourself to follow. This allows you to better manage your money and you have no excuse not to follow as you just to have to ensure that you manage your money according to this method of budgeting.
- Get a Side Hustle
After budgeting, you would realize that it might not be enough and there is only so much you can cut on your expenses. In this case, you should try to venture into the second source of income, this could be anything that does not take up too much of your time.
For example, you can try being a blogger, and earn money from your content, be a YouTuber to make fun videos, and make ad revenue. You can also pick up a part-time job if you want to. I have another article that talked about the different types of side hustles, feel free to check them out.
- Live Below Your Means
This is usually what most young people fail to do, living below our means. The thing is that most young people want fame and want to be “updated”, they only want to have fun and feel good about themselves materialistically.
But in fact, in your 20s, it is completely okay for young people to live below their means as it makes more sense for you to be broke and living on a tight budget as you simply are not financially stable enough to be spending your money on expensive things.
- Stop Eating Out
Rather than always eating out, you should try to eat at home or cook yourself. Not only it is more money-saving, but it is also more healthy as compared to eating out. If you cook, you can also learn how to cook and make delicious meals for yourself, picking up a great skill.
- Make Use of Good Deals
There are instances where there are coupons for you to use in a certain store. In this case, you should always try to make full use of the deals as it would help you to get the things you need at a lower price.
For example, if you are going out to have a meal with your friend, you have a 1 for 1 coupon, it is a no brainer for you to go to that specific restaurant and use that coupon to eat the meal at half price. This will help you to save a lot of money as time goes on as you use more coupons.
- Quit Your Expensive Spendings
If you find yourself spending too much on certain things that are not being utilized by you, you should cut them off and not waste your money. The most common one is a gym membership, it can cost nearly $100 a month and if you don’t go to the gym every day, it is a really bad expense and you should cut it off.
- Stop Using Your Credit Cards
If you are struggling with your debts, you should probably stop using credit cards as they are also a form of debt just that they are short-term and they might give you some privileges. It’s best that you stop using them if you are struggling with paying your debts as what if you forget to pay your credit card bills as there are just too many bills going on, you will suffer from the crazy interest rates and ended up paying even more debt.
- Learn To Say No
You should learn to say no not only to your friends but also to yourself. There will definitely be times where you want to have fun with your friends and chill by a bar but you have to consider if it is feasible for your budget. If you are one of those that would be worried about your friends thinking bad about you when you reject their requests, you might want to try reading this book as it helped me to worry less about everything and just focus on being myself.
Other than telling others no, you should also think about your budget before making any impulse purchases. You should be able to tell yourself no when you know that the purchase will put you in a bad spot financially.
- Try The Snowball Method
When you have multiple debts, you can consider trying this snowball method as you can pay off the debts one by one strategically. When you feel like committing more money to clear your debts.
This works by you identifying all your loans and you have to target the loan with the lowest amount payable. Afterward, you just have to pay the minimum amount for the larger loans while maxing out the payment for the smaller loans. In this way, you will be able to find yourself clearing the number of loans quicker as your smaller loans will be cleared quickly. When you clear your smaller loans, you can then allocate your money to focus on repaying the larger debts.
To Summarize
You have to ensure that the debts that you are taking on will not be too much for you to handle, you have to ensure that you focus on clearing the bad debts first. Debts above 4% interest are considered high and you should try to clear them first
Make sure that you budget well and become debt-free so that you can work towards your financial goals and retirement goals.
