Debt payment nowadays is as common as going to school or driving your car. This is because taking out a loan or using a pre-approved credit is ingrained in our society. Owning a house usually means taking out a mortgage loan. Buying a car means taking out an auto loan. Even higher education has slowly equated to borrowing student loans to pay for the cost of attendance.
In today’s society, almost everything is within reach though the price you pay equates to a monthly financial obligation. The problem starts when you incur too much payment which is more than what your income can cover. As you hand out your card to the clerk, you think that the installment on that new purchase won’t hurt.
And it won’t if you stick to just that amount. However, there is a big chance that you will add one more after that and another and another. Next thing you know, you have more payments than what you can handle. This is more evident with holiday debt hangover where it is not unusual to see consumers paying with eyes closed. They believe they can find a way to pay it back at the start of the year.
As soon as the bills start to come in, they still can’t open their eyes afraid of what the amounts would add up to. At this point, debt payment becomes a struggle and a real challenge to start the year. HBR.org even shares that a recent research showed that paying small debts first is an effective strategy. Though it would not work for everyone, it helps improve your confidence as you see paid off bills.
To start the year right, here are a few debt payment tips to look into. These strategies can help you either save money or simply use it wisely.
Watch your budget for food
One thing you need to understand is that you will always have food costs in your budget. There is no way around it simply because it is a necessity. You need food to survive on a daily basis. Regardless what diet you are on, food will always be there. Food cost differs from one person to the other based on various factors.
The usual suspects are quality and quantity of food. People believe that the better the food and the more you have of it, the bigger the expense. Coincidentally, people believe that eating unhealthy food is one way to save money. Though there is some truth to these statements, there is a way around them without sacrificing health and budget.
You can try preparing your family’s meals ahead of time so you can save time in buying the grocery and preparing the food. To save on lunch money, pack your lunch and bring it to the office. You can also invest in a coffee brewing machine and make your own every morning. These small adjustments can cut your food bill and help you save money in order to help you with debt payment.
Use rewards to offset fees and penalties
Credit cards are what millennials would refer to as frenemy. To the much older crowd, this can mean two things. A friend disguised as the enemy or an enemy trying to pass off as a dear friend. The role your credit card takes on depends whether you use or abuse your credit. It can help you manage your budget better or be the very reason it crumbles down.
One of the benefits of using your credit card is racking up your reward points. LATimes.com shared how the Chase Sapphire Reserve is giving 100,000 points as a sign-up bonus. There are instances where you can convert and use the points to pay down your credit card balance or get discounts on succeeding purchases. You might be holding back on this strategy because you are trying to increase your reward points. However, you need to weigh this strategy carefully especially if you are running late on your payment. Your points might be of better use being applied straight on your payment rather than stacking it up. This is better than losing money on penalties over unpaid balances.
Give up harmful vices and focus on debt payment
One of the things you need to understand is that when you are faced with big payments, you need to free up extra funds. That or look for ways to earn more money. For most, it is easier to try and save in some areas of their household budget. If you have harmful vices such as smoking or drinking then those are great places to start.
The amount you get to save on a daily basis might not be that encouraging. However, you need to add them up monthly or even yearly to see the difference it can make. It can help you pay off a card or two in a year. You also need to look at another unique advantage of giving up these vices – you get healthier. Your lungs and liver would thank you for that and you get to focus more on your career.
Look for a side hustle
If you still have the time and energy after your main work then looking for a side hustle can help with your debt payment. This is actually one great way of increasing your reserve funds as well. For some, it can be getting a second or even third job. While for others, it can be as simple as following their dreams or hobby.
A side hustle is meant to help you by adding extra sources of income into your budget. It would be a good idea to look into things you already love doing. Hobbies can be turned into cash-generating activities. Sell your baked goods online or with your office mates. Offer your photography services to family and friends. Create stunning digital designs for websites or online advertising. Look at your talents or hobbies and find a way to earn from them.
Sell some items can help in debt payment
USNews.com shared that before the proliferation of online selling sites, the garage sale was the way to go when you want to sell second-hand items. There are still a lot of places that offers physical garage sales but online selling sites have really picked up the pace with the advent of technology. Regardless where you sell your item, the idea is to give up and monetize things that you are no longer using.
When selling second-hand items, you need to make sure that what you are giving up are the things you no longer need. This is because you might have a hard time trying to replace them and spend more than what you get from the sale just to get them back. Audit what you have around the house and try to look at other people selling the similar item. This gives you an idea on the price you can sell your items for.
One added benefit of selling old and used items you have lying around the house is you get to declutter. For one, you free up space around the house and you will eventually realize that cleaning is a lot easier. It also helps you declutter your mind and gives you fewer things to worry about.Emotionally, it can also give you the chance to let go of items that might remind you of bad times in the past.
Live below your means
Frugal living is a great way to start the year and help you pay off your debts. The challenge with this approach is the stigma attached to it. Most people would be quick to point out that frugal people do not know the meaning of fun. They do not socialize and are penny pinchers. These are some of the words used to describe frugal people.
In truth, frugal people are some of the most creative people on the planet. They get to enjoy life without having to spend a huge amount. They also are the ones who has the best chance of reaching their financial goals in time. It all starts with the decision that you will live below your means. It would take some time but the lifestyle would eventually become second nature with practice.
Debt payment is a tough financial obligation of you do not have the funds to cover your payments. Good thing there are ways to address this problem and help you stay up to date with your bills.