Clawing Your Way Out Of The Debt Spiral
Clawing Your Way Out Of The Debt Spiral
Debt can be manageable in small amounts, but when it gets out of hand, the cycle can be very hard to break. It’s easy to look back and said you should have repaid your smaller debts early on, rather than take out further loans as forms of repayment, but there are still options available to you now – every if the debt is bad.
Stop borrowing
I know the thought of cutting off any logical form of repaying your debts seems counter-intuitive, but the first step towards conquering your overall debt is to stop taking out loans. The reason your small manageable debt became large and overwhelming in the first place is because you kept borrowing more to pay off the earlier, smaller debts.
Perhaps you also borrow to fund luxuries in your lifestyle. This is something you’re going to have to stop, as hard as it may be, until you’ve paid off all your debt. You can cut out the non-essentials, like that new TV you had your eye on, or a trip away that you can ill-afford right now. There’ll be time for all that when your finances are in order.
Pool all your non-essential money into debt repayments
It might take two months, or it might take two years; either way, this is the only way to pull yourself out of debt. Aside from rent and food money, all excess or “disposable” income you earn must be put towards debt repayments, or stop saving and start repaying. You won’t be borrowing any more money, so your debt will finally be decreasing, at long last, rather than increasing.
You could work harder, if things are really tight. As brutal as it may be, if you have deadlines which need to be met for repayments, you may need to consider working overtime, or taking on a second job. It all depends on your situation. If you did need additional money immediately, however, I would suggest it only wise to ask for help from family or friends; sources which won’t force you to pay the money back within a certain deadline. Remember, all excess money should be going towards debt repayments. Maybe cut non-essentials like chocolate out of your necessary food shop, as well.
Put yourself in a better position next time you need to borrow money
After clawing your way out of this mess, you might still struggle with a bad credit score. However, this doesn’t have to cause you problems in the future, whether you’re looking to take out smaller loans for big purchases like a car or a house, or dealing with an employer who’s looking for a good credit history.
There are other ways to improve your credit rating, such as an online credit builder account, which could actually help you even before you’ve paid off all your debt, by helping to save money whilst you improve your credit. If you need to take out loans in the future, when you’re in a more stable financial situation, or you just need a better credit score in general, this is one way out.
Finally, make a better budgeting plan for the future
The best way to avoid ever falling into debt in the future is to simply keep an eye on your finances. Whatever you’re earning in an average month, spend less than that amount. Consider how much money goes towards rent, clothes, food, tax and insurance each month or year, and then figure out how much disposable income you have in a given week, month or year. Don’t exceed that amount of money, and you won’t ever be in debt.
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