Einstein once said that the most powerful force in this world is compound interest. Looking back, it would appear that Einstein was perhaps correct.
Most of the time, we live our lives chasing the almighty dollar sign. We saddle ourselves with mountains of debt all just so that we can live the life of our dreams; fancy homes, new cars and expensive vacations.
Where does it all end?
Unless you’ve got millions in the bank or a distant uncle has betrothed you with millions, chances are you’re living with some form of debt.
Before you dismiss this article as just another “live life free” type deal, take a minute and digest the following:
In 2018, a study conducted by Northwestern Mutual reported that on average, most American are about $38,000 in personal debt.
Shocking isn’t it? And that’s not taking into the amount owed in home mortgages.
Scarier still is the fact that 2 out of 10 Americans will end up using more than 50% of their personal income to service outstanding debts. Despite being in the land of the free, it looks as if many Americans are slaves to debt.
From study loans to credit cards and mortgages, we’re wading into dangerous waters here. So, given the frankly shocking state of affairs, what can actually be done? To lend you a hand, we’ve put together this article to help you decide how you can manage your debt.
- Get the low-down on how much and who you owe
We’ll be honest here, dealing with a large amount of debt can be overwhelming at first. If you feel guilty or depressed, don’t worry, it’s perfectly normal.
Start off by making a list of all outstanding debt, this includes credit cards, student loans, car loans, etc. From here, you can use Excel to draft a rough schedule of payments i.e. how much needs to be paid and when.
This gives you a big picture view of how much you actually owe to your creditors. Following this, you can then prioritize what needs to be paid first and when.
Periodically check back on your schedule and take note of what still needs to be paid off. Before long, you’ll have cleared a large portion of your debt without realizing it.
- Make more than the minimum payment
Properly managed, credit cards can be a real lifesaver. When used irresponsibly, your credit card can break you financially.
As reported by CNBC, 70% of Americans surveyed admitted to being unable to pay off their credit card debts. From poor financial management to a lack of understanding, most folks find themselves saddled with huge debts.
Coupled with the extortionate interest rates levied on outstanding amounts, many are often trapped in a cycle of debt and repayment.
But it doesn’t have to be this way.
Forget to pay the minimum amount owed each month. Most of the time, it’s only sufficient to cover the interest owed on your debt.
Instead, always pay more than the minimum amount owed and you’ll be able to gradually reduce your credit card debt. While it may hurt at first, you’ll find yourself breathing easier once you’ve cleared off any outstanding debt.
- Make only cash payments
They say that cash is king, and we’re inclined to agree. In today’s cashless society, it’s easy to just swipe a card and forget all about it. After all, you can worry about it at the end of the month.
However, adopting this mindset is a great way of setting yourself up to accumulate huge debts each month.
Rather than charging that purchase to your card, go with cash instead. Studies have shown that people are less likely to make frivolous purchases when they’re paying for it with cash. This is because, we feel more connected to each purchase which means that we’re more likely to think it over more thoroughly.
If you’re the type that finds it difficult to resist spending, consider leaving the credit card at home and switching over to debit card. You’ll find yourself becoming thriftier and which then helps you cut down on expenses.
- Take on a side hustle
Surviving on a single income source is impossible in today’s economy. Instead of worrying about the future, why not take on a side hustle?
The connectivity offered by the internet has made it possible for just about anyone to develop their own side hustle. From freelance copywriting to selling stuff online, the potential is nearly limitless.
The extra cash you’ll earn can be put into your savings or used to pay off your outstanding debt. Besides that, keeping busy with a side-hustle helps you focus and stops you from stressing out about your debt situation.
Dealing with debt can be difficult and overwhelming. However, with the right attitude, you’ll be able to overcome anything and you will solver this problem faster than a horse competing in the Kentucky Derby races.