5 Tips To Get Out Of Debt

Debt — a four-letter word that can cause an overwhelming amount of emotions ranging from sadness, fear, anger and desperation. A very common feeling is that of failure. If this sounds all too familiar, it’s important to know you are not alone, you have options and MNP is here to help.

Here are five tips that can help you manage your debt:

1. Know where your money is going. Ensuring you know where every nickel is spent is essential to creating a successful budget. If you don’t know where your money is going, developing a budget is almost impossible. This step is often missed, which can cause you to inadvertently create a budget which is not attainable no matter how hard you try. Without tracked spending and a realistic understanding of your monthly expenses, you could be setting yourself up to fail.
2. Eliminate the extras! This is a simple way to add some more funds to your budget, allowing you to pay debt down quicker. This can be a simple as talking to the bank about adjusting their monthly fees, reducing your cable bill, cutting back on eating out or working out at home instead of the gym. These can be short-term reductions but could really have a significant impact on your debt.
3. Keep it Simple. With all kinds of resources out there, you can become overwhelmed with what is the “best” way to budget. What works for one person may not work for the next. Ensuring that your method for tracking expenses is quick and easy, this will ensure you stay on budget.
4. Pay more than the minimum payment/highest interest rate. Once the budget has been established, you can now effectively determine where your money is going, now you can maximize your funds and start reducing debt. You would be surprised how much paying just a little bit extra on your monthly payment reduces the debt, especially the debt with the higher interest rates. If you want a quick way to know how much extra to pay, go to your bank’s website and enter different payment amounts into the payment calculators.
5. Set up auto payments. If the payment comes out automatically from your account, you can avoid some interest and any late fees. Some credit companies may even increase the interest rate if the payments are late. For whatever reason, if the payment comes out automatically we will always make that payment for the amount that we want. If we choose the payment amount, we seem to have a way of convincing ourselves that we need that extra $20 this month. Automatic payments also allow us to stop thinking about finances all the time which can help alleviate some stress surrounding finances and budgeting.

Even though debt can be very overwhelming, the most important thing is to never stop trying to manage and reduce the amount of debt you are carrying. No one is perfect. Adjusting your budget takes time and so does paying off debt. Never be afraid to ask for help. With the right planning and a little bit of compromise, a strong financial future is attainable.