It’s unavoidable for most people to borrow money. The fact is not all of us have the financial safety net to pay for emergency expenses.
Consider the scenario of you or a loved one getting sick and requiring immediate medical attention. Even if there’s health insurance to tap, you can still expect to pay hospital bills out of your pocket.
The same goes for academic-related expenses. There are times when your source of income simply won’t suffice for the tuition of your kids or students under your financial responsibility.
So you seek help from well-off friends and relatives or banks and other lending institutions. Before you know it, your loans have piled up.
That is an unfavorable situation that puts your financial future at risk. And whether you borrowed from someone you have close ties with or a loan provider with whom you have purely business relations, you need to pay up. Doing so will let you maintain your financial dignity and a good credit rating too.
To help you prioritize payingoff debts, here are some money-saving ideas.
Explore extra sources of income
You probably have a full-time job that pays consistently. However, with the loans you’ve incurred, it’s no longer enough to cater to your financial responsibilities. This is the best time to explore other money-earning opportunities. Sure, you already have a 9-to-5. But with resourcefulness and diligence, you can still stretch your day to accommodate side hustles, too.
Look into your talents or skill set. Use those as a springboard for identifying potential sources of income. Are you creative with a knack for creating excellent designs using Photoshop? Why not sign up with freelancing websites where you can hawk your expertise? Your best options include Fiverr, Upwork, and Freelancer, to name a few.
Or maybe you’re a textbook Type A personality who thrives in order. Use that trait as a virtual assistant and get paid by the hour or by the project. That’s something you can do from wherever and whenever is most convenient to you.
Budget your monthly salary
Most of us have been accustomed to spending our hard-earned money without a monthly budget. That’s OK if your finances are still in order. For those under financial stress, spending sans a budget won’t cut it anymore. Your goal is to chip away from your outstanding debts so that in time they’ll go kaput for good. That requires you to be cautious of your spending.
You can’t get more cautious than by having a fixed budget to guide your monthly expenses. You can even take budgeting up a notch by committing to a weekly budget. Here there’s only one aim, and that is to commit to your scheduled budget without fail.
You’ll be surprised by how much money you can save from budgeting. For example, going to the grocery store with a list and sticking to it even if you see something that interests you will make a world of difference on the outcome of your shopping expenditure.
Stop spending on unnecessary things
This is closely related to budgeting. Yes, this tip is easier to pull off if you schedule your expenses. As much as possible, refuse the lure of retail therapy. It’s understandable how purchasing stuff makes you feel good. But that’s a quick high not worth the price you’ll pay eventually. The price? Financial stress. And, on top of that, payment of credit card interest alongside principal debt.
So know the difference between wants and needs. The latter are things you can’t do without, such as replenishment for your hygiene kit. The former are things you can sacrifice if only so you can prioritize paying off debts. Think bags and shoes that will no longer fit in your closet anyway.
Whenever you feel the need for retail therapy, find an alternative fix. You can exercise, for instance. That’s a surefire way to boost your dopamine levels without maxing out your credit line.
Control credit card use
That shiny plastic’s too tempting to use for sure. Gone are the days when you had to dig deep into your wallet for bills or your purse for coins to pay for stuff. Now you just swipe, and before you know it your purchase is ready to go, fast and simple.
And that’s exactly the reason why many people become mired in credit card debt. The practicality of purchase made possible by credit cards shrouds the financial risk involved in the system.
If you have outstanding debts, whether on your credit card or from other loan providers, it’s in your best interest to start paying in cash once again. Cash is easier to control. And you know exactly how much you have left on your budget.
Once you’ve taken care of your debts, feel free to go back to credit card use. But by then, you shall have learned your lesson: swipe wisely.
Prioritize your biggest loan
Your biggest loan is the most intimidating. It’s also attached to the highest interest rate, especially if you’re having a hard time paying the principal rate. Prioritize this loan before moving onto other loans.
Once you’ve conquered the mountain that is your biggest loan, it’ll be easier for you to pay smaller debts. That’s because you already know debt erasure through consistent payment is doable.
It’s challenging to cope with financial stress. In worst-case scenarios, you’re pushed against a wall and have no choice but to apply for a loan. However, incurring debt should not become a habit. Ideally, you allocate a portion of your income to savings, which you can tap for emergency expenses.
Now if you’ve already incurred loans, do not fret. You can commit to clever ways to pay off debt, such as the money-saving ideas in this list. All it takes is dedication and compromise. Keep at it and soon you’ll be able to take care of borrowed money one payment at a time.
And once you’ve settled your accounts with loan providers, consider your finances a clean slate. And try not to make the same financial mistakes you’ve done in the past.