A debt free lifestyle is easier to conquer than you think. It doesn't matter how much money you make or how much debt you have. Once you have learned how, the only bills you will pay are services. No mortgage, no car installments.
Steps
Step 1. Stop piling up debt
Eliminate credit cards and throw away checks so you avoid issuing overdrafts. Do not renew other credit cards or other loans. Stay away from agencies that offer loans. Remember - if you can't afford something today, you won't be able to afford it tomorrow either (which means not expecting to be able to pay tomorrow for debts incurred today to gamble).
Step 2. Admit to yourself that you are in debt and start living with that certainty
Did you know that most millionaires live in modest homes and drive used cars? That's why they are rich. Don't expect to eat in fine restaurants. You can't afford it, put your heart in peace. You will be able to go there one day, but not now. Don't buy new clothes for a while. There is nothing wrong with the ones you already have. Saving that money for a couple of months will help get you back on your feet.
Step 3. Make an account of your debts
Go ahead and face the problem. You need to open all those bills still sealed in the envelope. Make a list of all your debts, large or small.
Step 4. Pay with cash only
While it may be okay to use the ATM once you can control yourself, keep in mind that it still allows you to spend more than you should. But at least it's not like using credit cards.
Step 5. Talk to your creditors
Don't ignore them, they won't ignore you. If you keep in touch with them, they will be more willing to prepare a return plan based on your needs. If the first person you talk to is reluctant, ask to speak to their supervisor and insist until they are willing to make a plan with you. Try to be frank and friendly, no one will be willing to help you if you are rude.
Step 6. Plan your debts to pay first
You have to pay everyone something every month, even if it's just one euro, but you need to decide which debts to get rid of first. Focus on those with the highest interest rate. Also, call and ask to reduce the interest rate - many times it will be granted, just for the simple fact of having asked! Alternatively, you can use a "Scaling" approach, where you first pay the installment with the lowest balance, then the next one and so on. This leaves you with more cash in hand to start cutting down debts with a larger balance. This method is effective, because instead of paying small amounts of money to repay higher-interest debt, you can commit larger amounts, reducing the amount of time it takes to pay them back. Furthermore, you will feel encouraged because you will be able to realize the results of your progress faster and therefore you will be encouraged to persevere. You have to be careful though, because sometimes the money needed to pay off higher-interest debt is more than what you can clear each month by paying small balances. Check your finances thoroughly, double-check the numbers and decide which method is the most effective for your situation.
Step 7. Spin the savings
Once you are done paying off one, allocate the money to the next debt you are trying to pay off and continue in this direction. This is all part of the "Scalar" method mentioned above.
Step 8. Be frugal
So you don't like discounted packs? Sin. If you can save 10 euros on your next trip to the supermarket, why not take advantage of it? Buy a cheaper brand of toothpaste. Use less than you use now - pea size is all you need. And think you're paying half the 4 euro tube… because you're making it last twice as long! These are small things… however, many small things together make one big. And while it may sound "clunky", it's actually fun to think of all the little ways you can save. By shopping for food, buy what is discounted and learn to live with it. You will save and not starve. Go see the matinees instead of the night movie. Make a latte instead of buying Starbucks. Think about what you like… and then think of a way to make it more convenient! Homemade chili is much tastier than canned. And you can add all the things you love… Beer? Coriander? Jalapeños? Cheddar cheese? Just the way you like it! Do you drink a lot of bottled water? Fill it up at home. The savings will accumulate. Bring lunch to work, eating fast food and delis costs a lot of money.
Step 9. Become cautious with your utilities
Turn down the thermostat in the winter. Spend the evening in the library instead of heating your home. And read their magazines and leave the subscriptions alone. Fix leaking taps, turn off unused lights, etc.
Step 10. Change your way of thinking
Instead of saying that something costs only one euro, think about how to store it instead. The euro saved will give you interest. So that something doesn't just cost one euro, it costs your future!
Step 11. Learn to invest… not just to save… but to invest
Think of all the euros your money won't be earning for the future slipping out of your pockets. Look for a course to invest in at your local university. Or check out an online classifieds portal, like Craigslist. Find anything if you really want it. Talk to a teacher or librarian if you can't find anything. Then make your money work for you! Sure, it takes time; at 40 you can have 100,000 euros (and easily more!) or have nothing! Just check the compound interest tables. It's easier than you think, you just need to start. If you are young, you have time on your side … and time is one of the main factors with compound interest. If you have the opportunity to work for a 401K type supplementary pension, invest 1% if possible, just to get started. You don't want to run out of money, but at least you'll know you're working hard to put something aside.
Step 12. Save for one when you need it
This is an old adage, but it is true. Try to put away 10% of what you earn in savings. If you can't do this, at least save as much as you can. Even if it is 50 cents. Make savings the first account to pay. Because you are the most important thing you need to worry about. Then learn how to make your money work for you. If you want to play on the stock market, make sure you can afford to lose the money. Learn about the stock market as much as possible and start small. Don't throw your last € 5,000 into stocks you know nothing about because tomorrow there may be nothing left.
Step 13. Fuel prices are high
Concentrate all the commissions. Don't wander around for just one thing, do it all at once, fill up, stop at the post office, pharmacy and shop. Try to combine some of these things before you go to work or when you come back. Each month you will save a lot more than you think.
Step 14. Get rid of stress
Having debt is not normal or healthy. Take a break just to relax. You will be better able to manage debt when you have rested. Look for a book or two in the library - something light or humorous. Make yourself some (cheap) popcorn and have a wonderful and carefree evening.
Step 15. Never think that you are alone in all of this
So many people are trying to get back on their feet. It is certainly difficult to deprive yourself of the things that have made you happy in the past. Doing all of the things above, however hard it may be, will help you in the long run.
Advice
- Think before you buy anything. Do you really need it? If you don't need it, put it back.
- If you think you "need" something, wait a month (or six months, or whatever is right for you) before buying. If you still think you need it, buy it.
- Be strict with yourself.
- Be strict with the children, the expression "I do" must be deleted, even if this can mean that they cry all over the supermarket.
- Invest in good (real estate & education) and valued debts, so you will be able to pay off your bad debts faster.
