Stuck in debt? You are not alone. Thousands of consumers in the UK are faced with mounting debts from credit cards, loans and overdrafts. In fact, statistics show that in November last year, the amount of borrowing has hit an all-time high in seven years at more than £1.25bn for said month.
But just because you resorted to debt at one point doesn’t mean it has to take over your finances. It doesn’t matter how much debt you owe at the moment. As long as you have the willpower and the commitment to pay off your debt, you’re in the right path. Today, we’ll also help you pay off debt faster. Below are tips and tricks you can use to expedite your journey towards financial freedom.
Stop borrowing money
One of the faster ways to get out of debt is to put a stop to creating new debt. That means no more additional credit charges, no more impulsive buys and no more buying just because you can or you want to. In short, getting out of debt fast is also about changing your lifestyle.
Remember that unless you change your spending habits, it will be very difficult to achieve any of your financial goals. Start from the heart of the matter by committing to a new lifestyle then move forward with cutting up those credit cards.
Save up for an emergency fund
If you don’t have an emergency fund yet, the next step is to save up for one. Before you can focus on paying off debt as fast as you can, you need a financial cushion in the form of an emergency fund. This fund comes handy in case you lose your job or a financial emergency pops up and surprise you unexpectedly.
As a typical recommendation, your emergency fund should equal at least 3 months’ worth of your expenses. That should cover your bills, food, transportation and other needs for the next three month. You can start setting aside a small percentage of your income, maybe 5 to 10%, for your emergency funds until you reach your goals.
Pay off debts with the highest interest
To expedite your journey towards financial freedom, you can also start paying off your debt while saving for your emergency fund. If you have a large amount of debt from several financial institutions, the trick is to make a list of all your debts. Arrange them according to interest rate with the highest rates at the top.
Kick off your getting out of debt project by paying off debts with the highest interest rates first. If you can, pay these debts as fast as you can to get rid of high interest rate out of the picture.
Consolidate your debt
To further hasten your journey towards a debt-free lifestyle, you may also want to consider consolidating your debt. This way, you can further lower the total interest rates you are paying for. You can take out a loan with lower interest rates to pay off your highest interest rates debts. When yo consolidate your debt, you also only need to focus on paying off just one debt making it even easier for you to get out of debt faster.
Stick to a realistic budget
Once you have your plan for paying off debt covered, the next step is to create a spending plan and stick to it. Make sure your plan is a realistic one. Only this way can you stick with it in the long run and make a success out of this getting out of debt quick faster.