Life Loans

Being in debt can cause a lot of stress for you. Nowadays an increasing number of people are getting themselves deeper and deeper into debt without any idea of how to get out of it. If you are one of those people, you need a solid debt repayment plan. It needs to be realistic and you need to stick to it. Use these ideas to eliminate all of your debt in the next few years.

Make a budget – and stick to it

Your first step needs to be developing a budget. It sounds dreadful, but it actually can be easy, and certainly very helpful. First, see where you are. Look into your last few months’ expenditures on your bank statement. Now write down your monthly income. Subtract all your fixed expenses like the mortgage payment, car payments, or your children’ school fees. What you are left with is your money for all the variable expenses like food, clothes, books, entertainment, medical bills, and so on.

You need to make sure that your variable expenses can be covered with your disposable income (income minus fixed expenses). If it’s not enough you should probably rethink some of your expenditures or find another source of income (see below).

Increase your income

It is usually a good idea to increase your monthly income. Perhaps you could get a second job for the weekends and evenings, or even a few one-time gigs like babysitting. You need to make sure your expenditures do not exceed your income and that there is some money left every month that can be used towards debt repayment.

Create a plan to repay your debts

Creating a personal budget which you are able to stick to can make an impressive difference to your spending ability and reducing money-related stress. However, developing a personal budget and making it work for you requires no less discipline than sticking to a diet.

See where you are

First of all, as Richard Feynman instructed a graduating class at Caltech: “The first principle is that you must not fool yourself-and you are the easiest person to fool.” Set realistic financial goals for yourself. Check out your account statement for the last few months to get a true image of where your money goes to. Think of areas where you may be able to cut back a little. List all the items that are fixed and cannot be reduced – such as mortgage, monthly car payments, or your child’s school fees. Subtract those from your monthly income to arrive at the amount of money that is left for you to spend on everything else. If the amount you end up with seems not enough for your monthly spending on clothes, food, entertainment, utilities, and medical care – consider switching to a smaller (cheaper) apartment or exchanging your SUV for a more fuel-efficient car. In most cases what you name “fixed expenses” are things you simply don’t want to change rather than necessities. Remember – you must not fool yourself.

Start an emergency fund (yes, really)