Financial success might be a far-fetched dream for a lot of people who are currently trying to manage big debt amounts. It is not easy to juggle multiple financial obligations while trying to make a life of your own. As you try and discover what really works for you, you are constantly bogged down by your debt payments.
It is not ideal but that is what a lot of people are going through at the moment. There are even a number of people who are putting off making big life decisions simply because they have too much debt on their hands. Some people might be pushing off be marriage plans or even having a baby because they simply cannot afford it.
Financial success differs from one person to the other. Success for one consumer might still be a failure for some. However, one thing is certain when it comes to managing finance and that is debt. Debt is a common denominator for people who wish to reach a certain level of success with their finances. That is why it is important to find ways to get out of it. Here are some of them.
Assess your present situation
To create a path to financial success, you need a starting point and that is where this tip comes from. You need to have a deep and comprehensive understand where you are exactly with your finances. Simply put, you have to know how much you owe and to whom you need to pay them to at what interest rates.
It sounds easy enough but there are challenges you need to overcome when you go down this journey. The most obvious is trying to piece together the big picture of your financial standing with all the details about your debt situation. This means you need to list down all payments and pertinent details and that could take time and serious effort. It might not help to know that USA Today shared that average household debt last year was over $137,000.
The other and more challenging part is overcoming the denial that can come from this initial exercise. You may not want to come face to face with your financial demons that is why you chose to brush them aside all these years. That could be the reason why they have ballooned to big numbers. This is a serious matter that you need to overcome because it not, then you have already failed even before starting with your financial success journey.
Ask for help
It might not be the first thing on your mind but it should definitely be on the top of your list. There are times when you are already way in over your head and you need a helping hand. If you need to, do not be shy to reach out to people or even professionals who can help. You can start with family and friends you love and trust.
Reach out to your family especially your parents and see how they can help. For one, they can give you sensible pieces of financial advice simply because they have more experience with finances compared with you. They can even let you have your old room back so you can save on rent. They might even be able to look after the kids so you do not have to pay for expensive childcare.
Finance professionals can also be a big help because they can give you an objective approach to your finances. They can look at your current situation and ask about your goals and targets in life. With those, they can suggest debt relief options like debt consolidation to help you manage and reach financial success in life.
Look for areas to save money
It will always be a positive step when you start looking for ways to save money within your budget. Regardless of what the reason is, this usually yields great results especially as it gives you more elbow room in terms of fund availability. It may be a lot easier than taking on a second job but you need to understand that this will take a tremendous amount of commitment from you.
This means that you have to take a hard look at your budget and identify areas where you can make some cuts. Can you give up signature coffee every morning and just brew a cup at home before leaving for work? How about cooking in batches so you can bring lunch to work? It also helps you prepare dinner a lot faster which lowers the chance of ordering take out.
Use that savings amount to pay down debt
In order to gain any level of financial success, you need to know how you can manage extra funds and that is to be aggressive with debt payments. Of course, there will be times when investing makes a lot more sense especially if you can earn more compared with the interest from your debt obligations. However, you can never go wrong with paying down debt.
Direct any windfall money to savings
If you are worried that you might not have any money left to save if you are putting all extra funds towards debt payment, then look at windfall money. You might get your hands on some performance bonus at work or even some tax refund checks. It is also possible that you get some money from family members.
Sooner or later, you might start to get confused about where to put what. One thing you can do is to divide whatever amount you get in two. Put half into debt payments and the other half as savings amount. You can choose to put it in an emergency fund, college fund, or even towards your retirement fund. The important thing is that you get to pay down debt and save as well.
Do not increase lifestyle with an increase in pay
The time might come that you get a raise in the office or that your business or side gig is doing good. When these things happen, it is inevitable that you earn more every month. FInancial success is not just all about paying down debt. It has a lot to do as well in making the right financial decisions in life and one of them is sticking to a certain lifestyle. Once you have an increase in income, you might be tempted to gradually increase your spending and lifestyle as well. Try to put that on hold and put whatever extra money you have towards improving your financial situation in life.
Use your experiences to strengthen your finances
One of the best things you can do to be successful with your finances even in the face of debt is to use your experiences to make you smarter. You need to learn from past mistakes to make better financial decisions. If you look at it, you might be in credit card debt because you had to use it as an emergency fund.
If that is the case, financial success can mean having enough savings to cover an unforeseen situation in life. Having this not only gives you peace of mind but it also protects you from making a mistake. A mistake that can put you in serious debt when you use your card in emergencies with no plans of repaying it back in full after. There are some of the things you can do to help you manage your finances to succeed even when staring down debt.