Are you struggling with debt? Do you feel stuck in an endless debt cycle with nowhere to go? Trust us, you’re not alone.
With the cost of living crisis, increasing inflation and uncertainty of world economic conditions, millions of people across the world are in debt.
However, it is essential to remember that no matter how bad you think it is, there is always a way out of the debt cycle. A few steps in the right direction can not only save you from the cycle of debt but also allow you to regain control of your finances.
Yet you have to keep in mind that breaking the cycle is not an easy task and takes time and effort. This makes it vital to have the right attitude and willingness to stick to the plan in order to achieve big results. Unfortunately, this is where many people struggle.
That’s why, today, we bring you a list of steps that you can follow to break the debt cycle, one day at a time. Moreover, we will also discuss some tips for building an emergency fund, gaining better control over your finances and progressing towards financial freedom.
It’s something we talk a lot about, but the foundation to solving almost any financial problem is to get your expenses under control. This begins with creating a budget that you can realistically follow and rely on in tough situations. It also requires that you are strict with yourself.
Here you need to begin by creating a detailed summary of your income and expenses to find out if you are making any unnecessary expenditures. This can help you find out whether you are overspending and also allow you to find opportunities to cut back on expenses.
Then you need to plan how you are going to spend your money from then on and make provisions for your debt repayments. This will help you get out of debt while also maintaining a decent standard of living.
If you’re concerned you may be overspending on certain items, it’s useful to speak to other people you know, to get an idea of what you should be spending.
2. Tackling High-Interest Debt First
If you have multiple sources of debt, you may have trouble figuring out where to start. That’s when you need to prioritise, target, and pay off the debts with the highest interest rates.
You could also look at loan consolidation, to help you reduce the number of repayments and save money on interest. This can effectively help you deal with your debt and give you a sense of motivation to keep going.
3. Cutting Back on Unnecessary Expenses
Whilst we’ve spoken about this before, it is such a crucial task that it needs special attention. Cutting back on unnecessary expenses is another one of the most crucial aspects of your journey to break the cycle of debt, and often one of the most painful.
To cut expenses, you need to work out where you’re spending your money and think about cancelling unused subscriptions, cutting back on eating out, and other tricks to spend less. Moreover, you could also look at trying to generate passive income by selling off unused items around the house, renting your bike, renting an extra room in the house, etc.
4. Building an Emergency Fund
Finally, you need to start building an emergency fund to protect you from future debt. An important part of any financial plan, a rainy day fund can be a cushion that you can fall back on in times of need.
Ideally, you can aim to save around three to six months of your living expenses. While this may seem an impossible task now, this is crucial to breaking the pattern of debt. Every pound you put away now, you’ll thank yourself for later. By saving a small amount of money every month, this practice can help you build a large savings fund.
Choose Salad Money for Fair and Affordable Personal Loans
Now that you know all about the various steps to break the debt cycle, you can follow these tips and get rid of debt once and for all.
However, in these trying times if you need emergency money or some liquidity to manage your debt better, we’re here to help.
As one of the leading lenders of low-credit loans in the UK, we can offer you fair and reasonable personal loans regardless of your credit score.
Specially designed to provide relief to working employees who have been wronged by the traditional credit score system, our More Than Your Score loans are here for you.
With the help of a unique affordability assessment that is based on open banking, we can fairly assess your creditworthiness and give you the loans you deserve.