Believe it or not, millions of people are stuck in the never-ending loop of borrow and repayment. It is the financial habit to take another loan to repay the existing ones, or sometimes make their installments. The borrowers feel there is no way to break the cycle without some hard-to-commit extreme measures.
You may have the solution right in front of you, but commitment is not your strong forte. For those people, simple measures are there to start the process of savings and repayment. This article has mentioned some tips to break the loop of borrowing and repayment without extreme measures.
Credit cards are the modern debt traps for the consumers that make them spend unnecessarily. The small payments through the cards add to a considerable bill at the end of the month. Also, the interest rates are quite heavy when compared to a simple loan from a direct lender.
Instead of credit cards, carry cash or debit cards with you while shopping. It is the first step towards living in your means. Make small purchases from it each month to maintain a good credit history.
While adding some item in your cart, ask yourself its purpose. Use the word “need” in the sentence to get the exact use of the item. If the answer is to solve some problem or add value to the living, go ahead with the purchase.
You need to spend very little money on the wants until the significant portion of the debts is repaid. Therefore, create a shopping list with only the essential items for the next few months. Celebrate small milestones along the way with small luxuries to keep the motivation high.
The 50/30/20 method works perfectly to have a lavish lifestyle with good money in the savings account. It states 50% of the income should be spent on the need, 30% on the wants, and the remaining 20% should be saved. After all, you need some money in the savings account to avoid more debts in the future.
Since you have heavy debts to repay, you can direct the budget for “wants” towards debt repayment. It is a temporary measure until the finances are stable. As the situation gets better, you can direct some portion towards the small luxuries.
A simple solution for some relief to the hefty interest liabilities is the debt consolidation loan. The lender will offer you money to repay the existing liabilities at a lower interest rate. The overall cost and monthly installments will be much lower than the current loans.
Also, managing the debt will be easy because of a single payment instead of multiple payments on different dates. The chances of missing the payment will be less. You will get a same-day loan for the unemployed to consolidate the debts.
You should have an aggressive approach towards debt repayment to end the financial troubles quickly. Target the debts with hefty installments or interest rates. It is recommended to pay more than required to close the loans early.
You must avoid any other debt to your name until the existing ones are cleared. As mentioned above, use credit cards for minimal payments to maintain a credit history. You might have to use the same gadgets, car, and other equipment for the next few months or years.
It means the monthly budget should include debt repayment and savings without exceeding income. Initially, it may seem intimidating, but the results will keep you motivated. The loop will break the moment you stop applying for loans any more.
You can start a side hustle to speed up the repayment. The internet has simplified the process of selling homemade items to buyers around the world. Only a small portion of the income will be used as the fee for the platform.
Start working as a freelancer if you have some creative or designing skills. The post-pandemic world has a huge demand for writers and web designers. Consumers are moving to online shopping because of the restrictions on movement.
In the end, you have to make some sacrifices to break the constant loop of borrowing and repayment. It requires commitment and determination from your part on achieve financial freedom at some point. Remember, these are some temporary measures with some long-term benefits.