It's always best to avoid getting into debt but if extenuating circumstances arise, you should prioritize paying it off to ensure you have healthy finances.
If you are currently struggling with paying off your debt, here are some steps you can follow to become debt-free:
Stop incurring more debt
The first step to getting out of debt is to stop accumulating debt. Getting out of debt will be harder if you keep incurring more. Avoid borrowing money from your family, friends, banks, etc. This step will not eliminate your debt but will help in the process of getting out of debt. Try to avoid getting yourself in situations that'll get you deeper into this financial pitfall.
Organize your debt
You can do this by calculating how much debt you currently have, then arranging your debt according to priority so you will know which ones to pay off first. You will need to list the amount you owe, the interest payable, and the monthly minimum payment on each loan. It is easier to develop a debt repayment plan when you have all this information available. Choose a debt repayment strategy that works for you. Either by paying off debt with higher interest rate first (Debt avalanche method) or by paying off debt in order of balance amount(Debt snowball method).
Increase your monthly payments
If you can pay more than the monthly minimum on your debt, you will get out of debt faster. Interests can exponentially increase the timeline you have for paying off debts. Assign extra money received towards debt repayment to get out of debt faster. Try to increase your monthly payments on smallest debt to be debt-free faster.
Build an emergency fund
Having an emergency fund is necessary when trying to get out of debt, it prevents you from incurring more debt. Unexpected or unplanned expenses might be the reason you are in debt; an emergency fund will take care of such expenses so you do not end up borrowing again. Include this on your financial plan as a safety net.You can take advantage of OVERWOOD's www.overwood.ng high-interest rate to build your emergency fund. An ideal emergency fund has up to 6 months of living expenses saved up.
Have multiple income streams
Building multiple sources of income is a necessary step to get out of debt and avoid living paycheck to paycheck. An extra source of income will help you pay off your debt faster than you expect. This could involve starting a side hustle, getting a part-time job, or selling products online. Using the extra money you earn to pay off your debts is key to getting out of debt faster.
Change debt-enabling habits
You will need to cut down on your expenses as much as you can if you want to pay off your debts faster. The fact is, more than half of Nigerians spend more than they earn each month. Once you track your spending habits, you will be able to cut off the excesses so you can live frugally. You can achieve this by replacing paying for DSTV with GOTV, cooking home food rather than eating out, and reducing your data consumption. Just try to live below your means for as long as possible until you can pay off your debt.
Live within a budget
One of the reasons most people run into debt is because they do not know how to manage their expenses. To get out of debt, you need to be in control of your personal finance and the best way to achieve this is by budgeting. You need to live within a budget and cut down on your expenses to stop accumulating more debt.
Getting out of debt can be a difficult task but by practicing these habits and being disciplined, you will get out of debt in no time!
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