Our quest to get out of debt is far from being over. If you think that the improving economic conditions mean the average consumer is debt free, think again. It seems that a lot of us are still in debt and it will stay that way unless we do something drastic about it.
Consumer debt continues to rise as we ended 2013. Based on the information found on an article published by Bloomberg.com, overall consumer credit rose once more in November 2013. Of course, this is to be expected as people scrambled to meet their holiday buying needs.
Based on the report they got from the Federal Reserve on January 9, the consumer debt grew by $17.9 billion. This growth happened despite the increasing household wealth and recovering job market conditions. Based on the report, the debts that contributed to the increase in consumer credit came from student loans and auto loans.
Although economists are saying that the increasing consumer credit confidence is a good sign for the country, it does not remove the fact that a lot of us are still struggling to become debt free. It seems like we are still caught in a never ending debt cycle and if we want to get out of debt, we have to start doing something different this coming year.
But what can we do to help pay off our mounting debts?
How consumers pay of debt, according to Credit.com
Credit.com conducted a survey that reveals the top 7 ways that people are taking action to help them get out of debt. Let us discuss them one by one so we can provide you with some insights in case you want to implement them in your life as well.
60% started budgeting
Majority of the people who plan to get out of debt are saying that they have started budgeting to help accomplish this financial feat. Well we couldn’t agree more. The presence of uncontrollable debt is evidence of a disorganized financial life. If you had full control of your money, you wouldn’t have too much debt that it had become hard to get out of it. This is where a budget plan can help. It is one of the most effective tools that you can use to put order back into your financial life – especially with the debt that you have.
37% cut back on eating out
The second on the list is cutting back on food expenses – especially eating out. When we dine out, it costs us much more than when we make our meals from scratch in our homes. You need to seriously consider planning your meals and thinking of the best ways that you can keep your costs to a minimum – without sacrificing what your physical body needs. If that means planting a garden of herbs or buying your food in bulk – that is up to you. Just keep your food costs to a minimum by opting to eat at home. It is much healthier this way.
31% remove unnecessary expenses
Another option that survey respondents said they did to help get out of debt is to remove the expenses that they know they can live without. The survey mentions cable, phone, and insurance but your list can include so much more. It can include memberships you can cancel, bundling of subscriptions to lower costs, etc.
20% consolidated their credit card debt
So far, this is the only direct debt solution and it is in the fourth place. Consolidating debt into one payment is one of the most popular ways that you can get out of debt without filing for bankruptcy. Apparently though, only 20% of the survey respondents thought about a debt relief program as their way to debt freedom. Well you have more than one options before you. There is debt consolidation loans, debt management, credit counseling and debt settlement. You can choose among these to get a most structured way of solving your mountain of credit obligations.
14% worked a second job
Being in debt means your income is not enough to pay for all your expenses. This is the reason why some people think that they can get out of debt by simply increasing their monthly cash inflow. While this can work, you have to realize that you also need to improve your spending habits. So be very careful in case you decide to use this as your way out of debt.
13% cut back on coffee shops
Cutting back on the latte’s every morning was actually taken seriously by a lot of people. While the advice is reasonable, people literally did not buy coffee from cafes anymore. Of course, this advice meant other expenses too so try to look for more expenses that you can remove from your budget list.
3% lived with a roommate
The last option that helped respondents get out of debt is taking in a roommate to help with the monthly costs. One of the biggest expense that eats up our income every month is related to our home. Getting a roommate will help ease that.
All of these options were something that consumers relied on to help them get out of debt. Whether this is applicable to you or not, depends on your unique situation.
Tips to be smart with your debt relief option
In truth, there are many debt relief options that you can choose – some requires a professional while others you can do on your own. In some cases, choosing the right one will help you get out of debt faster.
There are three important considerations when you are planning your debt relief option.
You have to consider the type of debt that you owe. There are certain debts that cannot be accepted by certain debt relief programs. For instance, debt settlement cannot work on secured debts.
You have to consider your financial capabilities. Another important factor in choosing a debt solution is how much you can afford to pay for your debts. If you can afford to pay them as it is and you just need a more structured payment plan, then you can benefit from credit counseling, debt management or even debt consolidation loans. But if you need a debt reduction, you have to go for debt settlement.
You have to consider your life after you get out of debt. Lastly, you need to think about what you will do after you have successfully paid off your dues. It will give you an idea about what you are willing to sacrifice. Debt relief programs will usually cost you something – it can be time, a good credit score or a lot of money. By knowing your future goals, you should be able to pinpoint the programs that will land you closer to where you want to be when you are finally debt free.
The way to get out of debt is not the easiest road that you will take but it is the most rewarding when you reach the end of it. You have to consider carefully the three factors that we mentioned so you can be smart about your debt solution. You can check out what worked for other people and you can also go and pave a new road for you. Either way, the important thing is to select a way that you can commit to and complete. Even if you choose a debt relief program that is the most effective in the industry, if you cannot discipline yourself enough to complete it, then it will not serve its purpose to you.