10 Tips To Pay Off Your Debts

From student loans to credit cards, mortgages and auto loans, i think most Malaysians are saddled with more debt these days. While it may seem like an uphill battle for most of us to get out of this financial web, its not really the end of the world if you are swimming in debt.

We have compiled 10 ways you may want to consider in getting out of those debts.

1. Setting a Goal

It’s crucial to set a realistic target or a goal for yourself when. Weigh in your income versus your debt and then come up with a plan. Monitor your progress regularly to help you stay on track and motivated to reach your goals.

2. Budget Budget Budget

This ancient formula actually does work.If you don’t already have a budget, putting one together is a great idea. The idea of budgeting is just a simple way of you telling your money where you want it to go. Looking thoroughly into your previous expenses from your bank or credit statements should give you an idea on where your money flows to. Also its a good way to wake up! You’ll want to create categories for each expense in order to set a limit for that category, and also list your income. Be sure your budget never exceeds your income — if it does, there might be some items you’ll need to cut.

3. Target the chunkiest debt first

It would be a good identify your credit card interest rates from highest to lowest, then tackle the card with the highest rate first. When you pay off the balance with the highest rate first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards. 

4. Put that credit card away. 

Here is one very effective way to put a stop to that piling debt. Remove all credit cards from your wallet, and leave them at home when you go shopping. Even if you earn cash back or other rewards with credit card purchases, stop spending with your credit cards until you have your finances under control.

5. Down Size

Again, take a look back at your expenses from last month. Is there anything you really don’t need? Did you go out to eat too much? Do you need to rein in entertainment spending? Pay special attention to monthly regular monthly subscription services that can add up big over time. Then, apply these savings to your debt.

6. Garage Sale 

Nothing to do on that boring Saturday afternoon? walk around your house and scout. Is there anything taking up space that you really don’t need? Maybe there are some larger items taking up space such as unnecessary furniture that could be sold to pay off your debts and decrease your financial burden. You could host a garage sale, sell items on eBay, or sell items on online yard sale Facebook groups and other sites.

7. Turn over a new leaf

More often than not, its your daily habits and routines are the reason you got into this mess, Spend more time thinking about how you spend money everyday. From food, to gadgets and clothes. Do you really need your daily latte? Can you bring your lunch to work instead of buying it four times a week? Ask yourself: What can I change without sacrificing my lifestyle too much? 

 8. Increase your income

Now, extra income always helps right? especially if you are caught in a web of debts. You might find that searching for a better paying job is the way to go to increase your income for the same amount of hours put in. However, if you really like your current job or you’ve found you’ve maxed out your earning capacity in your field, why not get a second job? It doesn’t have to be for a long term but just for a short period of time until you’re able to pay off your debts in full.

9. Consolidate your loans

This can be a helpful first step in getting your debt paid off. It helps keep you from building up new debt while you’re paying off the consolidation loan and it allows you to save a bit of money every month. Savings isn’t usually what someone in debt thinks of first, but if you don’t have savings, you’ll likely need to use your credit cards again part way through your loan and end up racking up more debt. So the key to benefiting from a consolidation loan and making it an effective tool is to use a spending plan (a budget) to ensure you keep your spending under control and set aside some money each month for emergencies or unplanned expenses which will inevitably occur.

10. Take advantage of balance transfers. 

As the name implies, a balance transfer allows you to transfer the outstanding balance from one credit card to another. You’ll have to decide on a tenure with the bank to repay your credit debt in monthly installments. Balance transfer credit cards are the best option if you’re struggling to pay off your bills every month. You can consolidate debt from several credit cards onto one card.

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