With a new year comes a ton of determination. One of these can be getting out of debt. But eliminating debt cannot happen overnight. You need to have a proper strategy to help increase your chances of success. Here are a few tips that you can use to help reduce debt and, hopefully, become debt free in 2023:
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Draw up a list of income and outgoings
Firstly, you should draw a list of income and outgoings while managing debt.
In the new year, begin by working out the fixed costs: those that cannot be condensed or evaded each month.
With the available disposable income, it’s important to be realistic about how much you will need for day-to-day living and your source of income.
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Cut what's not required
Further, align your spending and values and cut expenses. Experts advise reviewing monthly subscriptions because services such as gym memberships, cable TV and online streaming subscriptions can add up quickly.
It's better to write down everything earned and spent over the course of 30 days. After this, you can evaluate the financial activity at the end of the time and if any costs seem needless, immediately stop it.
Automate EMI payments
Debt repayment should be your top priority by opting for an auto-debit option. Also, you should try paying the outstanding amount on a credit card by the due date and avoid rolling over the bill amount to the next billing cycle.
Create a sensible debt repayment strategy
Those already under a heavy debt burden can create a sensible debt repayment strategy. The first thing would be to avoid any new debt, particularly credit card debt. If it is difficult to pay EMIs, one can plan to sell some of the investments or non-income-generating assets and use the proceeds for debt repayment.
Many a time, lenders also offer debt restructuring options that would help borrowers to accelerate debt repayment.
Settle short-term loans with bonuses or salary increments
Everyone is pleased when they receive a promotion or a bonus at work. However, keeping the additional cash in a bank account is not a good idea. Rather, use it to settle your short-term loans.
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