It is easy to pretend everything is fine when you are in debt until it catches up with you one day and you find yourself having trouble repaying your monthly loans and making ends meet. Putting it off by thinking that you can always catch up when your next salary comes in will only add to the stress too.
Hence, making choices and certain lifestyle changes as soon as possible is the most effective way to be debt-free quickly. Here are six tried and tested tips that will help you to get out of debt swiftly - read on to find out more.
1. Start budgeting
Having a practical budget that you stick to monthly is one of the first steps to being debt-free; instead of wondering where your money has gone, you will essentially be telling your money where to go.
One of the most popular budgeting plans is the 50/30/20 rule where 50% of your salary goes to basic necessities such as food and expenses, 30% goes to wants like shopping, and 20% goes to saving or paying off your debts. Of course, the percentages can be adjusted to suit your lifestyle and situation.
Having a budget also tells you where you spend most of your money so if you find yourself splurging on expensive restaurants every month, it is perhaps time to cut down on such expenses to be debt-free.
2. Consolidate your debts
Consolidating debts through the Debt Repayment Scheme is usually seen as the last resort for individuals as it is associated with bankruptcy. But what many don’t know is that the Debt Repayment Scheme will only be offered to you if your combined debt does not exceed $150,000 and can only be initiated when a bankruptcy application has been made against you in the High Court by yourself or your creditor. Contrary to the negative stigma attached to it, the Debt Repayment Scheme is actually a lifeline for many who are in debt.
In a Debt Repayment Scheme, your debts will be consolidated and you will be offered a monthly instalment plan of up to 5 years. At the same time, your creditors will not be able to take legal action against you without the Court’s permission and your debts will stop accruing interest - this is to create a win-win situation for both parties.
Thus, it is recommended that you take up the scheme and roll multiple debts into one, ideally without interest, to get out of debt. Once you have repaid your debts, you will be debt-free without having to live with the social stigma and penalties that come with being bankrupt.
3. Make changes to your lifestyle habits
Frugal living is one of the best ways to get out of debt quick since we often spend more money than we think on wants instead of needs. Therefore, making changes to your lifestyle habits can make a huge difference.
Try cooking your own meals instead of dining out, using coupons as much as possible, brewing your own coffee at home instead of purchasing your daily cuppa and finding cheaper alternatives to some hobbies. Instead of signing up for expensive yoga or fitness club memberships, why not consider free online workout classes or go jogging at park connectors to get the same adrenaline pump you need?
4. Set a lower limit for your credit cards
One of the most common causes of debt is the overuse of credit cards as it is easy to forget that you will have to repay how much you have spent since you do not see money leaving your bank account immediately upon swiping. Late or insufficient repayments will also result in interest.
So if overusing your credit card is the reason you are in debt, consider setting a lower limit so that you do not overspend or better still, refrain from using credit cards at all to be debt-free quick.
5. Try the snowball method
Apart from budgeting, another effective way to be debt-free soon is by trying the snowball method.
Firstly, organise all your debts by balance size and pay the minimum amount owed. Then, use any extra money to pay off the smallest debt and once that is paid off, roll the money towards paying off the next debt. Continue doing so until you have repaid all of your debts.
The snowball method has been proven to be helpful as it motivates you with those small wins whenever you pay off a debt.
6. Review your subscriptions
Last but not least, review all your subscriptions and cancel any unnecessary ones to save cost.
For instance, if you subscribe to a weekly grocery delivery service simply for the sake of convenience, consider cancelling and doing your own grocery shopping. This allows you to select what you really need and you can even purchase the cheaper option.
Get in touch with a debt consultant
If you still find yourself struggling with repaying your debts even after following these tips or simply want to find out more about what you can do to be debt-free as quickly as possible, get in touch with our debt consultants here at Debt Aid.
We are a debt solution service provider in Singapore that aims to offer our clients personalised solutions that will help them regain financial freedom. Having helped more than 1000 cases since we started in 2018, we are confident that our knowledge and expertise will assist you in repaying your debts the most feasible way while lessening not just the financial burden, but also the emotional burden on you.