Debt can be crushing. We recommend these steps to rapidly transform your finances in short order to ensure you’re on the right side of your Credit Score and creditors. Whether it’s an unforeseen medical expense, student debt, or credit card debt you can find yourself in rough waters quickly. These tips will help you escape the debt trap that most Americans find themselves in at some point in their lives.
1. Cut The Big Stuff
These tips aren’t rocket science but they are most painful or uncomfortable way to manage your debts. We recommend tackling these big issues first because they’ll make the most impact on your finances.
Ask For A Raise
It’s not easy. You don’t always have the bandwidth to ask flat out for a raise, but you can take proactive steps to making it more feasible. This can be a game changer as there are only so many costs one can cut. Even a 1 to 2% increase in pay can elevate thousands of dollars in interest you may otherwise pay depending on the type of debt you have.
There are also other methods of getting a pay bump, so don’t go in strong with your boss if you don’t have a project or a big ownership change at work. Ask about training programs to get certified or professional credentials boosted within your trade. Whether you’re a software engineer or a carpenter, there is always something to get certified in that is related to your profession. Always talk to your boss or union first before paying for training or certification costs first as sometimes these are extensible or reimbursed once you pass certification exams. Most trades, like nursing, will offer flat pay increases per certification type, for instance a $1000 a year pay bump if you know Medical Spanish. These can be an enticing option for anyone who needs cash.
Radical idea right? Often we get trapped into a false sense of worth and feeling as though we deserve it. Think about downsizing as fast as possible as an option. Many financial advisors state housing as a core debt driver in America. Those living in cities may want to think about taking on a roommate or moving back in with their parents or siblings to cut costs. Remember, when it comes to slashing debt, there’s no need to be embarrassed about slashing costs to start building wealth.
Another factor that impacts moving is that neighborhoods can have drastically different costs of living. Even if you’re in a cheap apartment, you could be in a high cost neighborhood for essentials.
Downsize Or Sell Your Car
Cars are not cheap. Interest payments, insurance, and maintenance add up quickly for both new and used cars. They depreciate in value and tend to be a bit of a status symbol. Many recommend buying used, so if you have a newer car, think about trading it in for a cheaper one to take advantage of lower insurance and monthly costs. If you can, try to do your homework on sites like CarFax.com first before buying used and more boldly, try to use public transportation such as the bus or a bike to really burn down your monthly costs.
Make All Your Food
It’s easy to get sucked into eating every or most meals out. You can use cooking as a way out of debt by buying and cooking all your food every week. Some have claimed this as the saving grace of their finances. A couple who eats lunch out during the work week can save hundreds a month by cooking their own food each week. Buy some Gladware in preparation for your shift to making your food so you have plenty of ways to store your food.
2. Kill Your Subscriptions
Most subscriptions in America are a chronic waste of money. In 2015, AOL still had 2.2 Million subscribers to it’s dial-up business, despite the technology having been replaced with cheaper and better technology. That shows you how bad our subscription-addiction can be.
Cut The Cord
This isn’t just for people in their 20’s and 30’s. Many Americans are dumping their over $150/mo TV/Cable subscriptions for just internet and a Netflix or Hulu subscription saving hundreds a month. Another option that your writer uses is a HD Antenna to connect to local and national news channels for free with just your existing TV. People cut the chord completely and push themselves to work out of coffee shops. Others split internet costs with neighbors to shred costs even further.
Drop That Gym Membership
How often have you used your gym membership lately? Ever consider just going for a jog outside or making use of equipment in public parks or your own basic band exercises or equipment? Consider dropping the gym completely if you haven’t been in over a month and invest in a nice pair of workout shoes and exercise bands to get your sweat on at home or outside for a fraction of the cost.
3. Cash Flow
Get A Second Job
This usually takes a bit of work and is on a longer time frame for most people. Even a small amount of a $100 extra a month can compound throughout the year on high cost debt like credit card debt. Start thinking about how you can use your evenings and weekends to take on extra work to make some more money. This doesn’t’t have to be on the books work and can be through online services like Upwork or Fiverr so you can do the work from anywhere.
Sell Or Make Something
This can be tricky to get started but trying is sometimes the only way to make it work. eBooks, crafts, and even seasonal vegetables can all be created or sold at markets stalls with sometimes less than sixteen hours of work. A little bit of cash flow can go a long way, and if done correctly, your small business can scale over time.
We save this one for last as it’s the most extreme of all measures to take. If you find yourself in crushing debt and you truly have made the sacrifices necessary to cut your costs to no avail, maybe through a poor business decision or some other unexpected and drastic expense, you should consider bankruptcy. It’s okay to admit that you failed and it may be better for you to address it quickly than to let a lingering debt crush your ability to live a happy and healthy life.
The bankruptcy laws in the US have become more challenging in recent years. You should consult a bankruptcy lawyer early, but only after talking to a financial advisor. Remember bankruptcy lawyers make their money from bankruptcy proceedings and that may not be in your best interest. A third party opinion is not only needed from a financial advisor, but we recommend them on a regular cadence throughout your life, debt or no debt.
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