We’ve all been there. That moment when you take a look at your banking info and realize that oops, maybe you shouldn’t have splurged last month. Or just feeling frustrated…like when is your savings account actually going to bump up?
Debt is a real thing – pretty much everyone has some kind of debt, from the obvious like credit card debt or student loans, to bigger-scale debt like your mortgage or even a car loan. And while debt is totally normal to have, there is a difference between debt you can manage and debt that takes control of your life.
Before you start spiraling, read up on four killer strategies to kick debt to the curb.
If you don’t have the money, don’t spend the money
Credit card debt is one the easiest ways to start slipping into a cycle of endless debt. After all, credit card companies have made it really easy: offering generous limits, long repayment periods, welcome bonuses, one-tap purchases in stores, and of course, those sweet rewards and points.
But credit cards have one of the highest interest rates out there, and in no time, you can be stuck making the minimum payment on your card while your interest keeps on stacking up. Your best bet with a credit card is to only use it for purchases you know you can afford and things you regularly budget for (like your Netflix account or cell phone bill). If you really need to use a credit card and can’t pay something off right away - before you make a purchase, calculate how much of each paycheck you’re able to apply to your credit card bill so you can stick to a repayment plan.
Pro tip: If you really want to curb credit card spending, the easiest solution is to stick to cash or debit until you know you’re out of the woods debt-wise. You won’t be able to spend more than you’ve got on hand and you can focus on paying down your credit card instead of adding to your balance.
The snowball effect is real
When you have a bunch of unpaid bills or expenses, it can feel overwhelming to deal with. It’s especially easy to freak out when you see the biggest bill. How can you ever save up enough to get rid of that expense?
Instead of trying to bite off the biggest piece of your debt pie, start small. Lay out all of your bills from smallest to largest. Then pay off the smallest one. You’ll be one step closer to being debt-free, and taming that next beast of a bill won’t feel so scary. You’ve got this.
Pro tip: Sometimes bills pile up simply because you’ve forgotten to pay them. And then you get hit with an overdue payment, and it becomes that much more stressful. Don’t be about that life. Try to set up automatic payments and put your bills on autopilot.
Stop scratching those impulse itches
FOMO is real. You see something you love, and you just want it, and it’d be oh so easy to just hit “buy”. Impulse control is hard for everyone, but if you’re really focused on becoming debt-free, it’s worth building up your skills.
The next time you see something you’ve got to have, grab a notepad or your phone and make a note of exactly what it is, and how much it costs. If the item is under $20, revisit it 24 hours later. If it’s under $150, wait a week. Anything more than that, give it a few weeks. If you still love and want an item that badly, do some budgeting to see where it fits. Most of the time when we give ourselves some breathing room, we’ll find we don’t really need that pair of shoes or whatever’s caught your eye. Stopping impulse spending will be a massive help in freeing up cash to kill your debt.
Pro tip: You know how working out with someone else makes you more accountable? So does shopping. Challenge yourself to tell someone close to you – a voice of reason, not your BFF you love to shop with – what exactly you want to buy and why. Having to explain yourself can be reason enough to shelve a purchase.
Save your money to save yourself
One of the main reasons why debt spirals out of control? Not having anything in your savings. Look, life happens. That’s especially true this past year. We can’t plan for every little thing that can put our finances in a pinch. If you lose your job, or get in a car accident, or even something simple like unexpectedly having your rent or condo fees go up, there’s not a whole lot you can do about any of that.
But if your budget gets squeezed while you figure out how to adjust your spending, the biggest lifeboat you can give yourself is a healthy savings account. When something throws your life off, use your savings to help out instead of relying on credit or payday loans.
Pro tip: You’ve heard saving is a good thing, but how much should you be saving? And what should you be saving for? The 50/30/20 rule says that 50% of your income should be going to necessities – housing, food, essentials. 30% can go toward the fun stuff, or your ‘wants’. That remaining 20% should be put away for your retirement, or for when you’re saving up for something special (or just to float you when something goes sideways). If you’re nervous about committing 20% of your check, keep it simple: budget for an automatic transfer from your main account to your savings account on payday.