Six Ways to Get Out of Debt


I was out to dinner with some friends last week and what started as a relatively healthy meal took an ugly turn with the arrival of the dessert tray. Staring right at me was this super-moist chocolate cake with rich ganache layers.

After half an hour of trying to avoid looking at it, I gave in and ordered a slice. I promised myself I will only have one spoonful. Just one.

Then I couldn’t stop. So I had another one.

And another.

And within 10 minutes, I had finished the entire creamy and slightly bitter, fluffy slice.

It felt so good and I enjoyed every bite, despite my friends’ subtle reminder that I had already had a few sinful desserts that week.

Then the remorse started setting in. My pants suddenly felt very tight; I started thinking of the amount of exercise I will have to do to lose the 600 calories just from the chocolate cake. Not to mention my rising blood sugar levels.

Being in debt is a little …. correction … A LOT like that. You feel good for a while since you are able to buy that gadget you normally cannot afford. However, you soon start feeling its after effects.

From the fear of opening that credit card statement because you know that the balance keeps on piling up every month to not being able to switch jobs to follow your dream because you need to pay off your debt.

Don’t despair. You CAN break this vicious cycle.

Here are a few ways you can consider:

1.Decide to stop borrowing money and stick to it

This is, by far, the most important step to getting out of debt. It is also the most difficult.

This will mean not using credit cards to pay for your lifestyle and perhaps adapting a cash diet. You may want to stay away from activities that encourage you to spend, whether it’s browsing online or walking through a mall during your spare time.

Learning how to differentiate between what you want and what you need is critical.

2.Pay off debt with higher interest first

This does not necessarily mean the biggest debt you have (like a mortgage or car payment), but often this is smaller debt that you acquired by swiping your credit card.

Fact: credit cards charge on average 2-4% per month? This amounts 12-24% interest per year. This is way higher than other type of debt available out there.

We are not suggesting that you stop having any credit cards; instead, make sure that you pay off 100% of what you have charged to credit card by the end of the month. Do not leave any balance.

3.Throw any excess cash you have to pay off your debt

Simply put, use your annual bonus to pay off your debt first instead of using it for a holiday. The faster you can pay off your debt, the less interest you need to pay in total. And the sooner you will be able to go on a vacation, debt-free.

4.Budget realistically every month to allocate some of your income to pay your debt

If possible, set aside higher amount than the minimum required payment of your debt.

5.Get a side hussle

Yes, this will mean that you have less free time to enjoy and hang around with friends. However, you can also think about it this way --- a side job usually forces you to meet more new people, expanding your social and professional circle. It will also hopefully keep you from spending all that free time buying “stuff”.

6.Other suggestions

Some people suggest applying for new debt with lower interest to pay off your higher interest debt. In our opinion, however, it depends on what type of debt you have ie., whether or not your new/old debt has collateral, for instance.

Usually, lower interest debt requires collateral. So If one is not careful, there is a real risk of losing the collateral (property or other asset). If you are thinking of this approach, we suggest consulting a personal financial advisor you trust.

Like my chocolate cake situation, getting out of debt requires self-control and constant discipline, because it is usually not the one slice that breaks you, but the countless other slices of dessert that you couldn’t resist.

Select clients to share this article with:

Select all
Name Email

You currently have no clients.

×
×
×
×