Most people don’t like the idea of being in debt, and for good reasons. It’s unsettling to know that you owe someone money, and it can feel like a burden when you have to use a fraction of your salary each month to make payments.
However, the truth is, most of us have some sort of debt – home loans, car loans, education loans, personal loans, or business loans. Loans enable us to do many things and can be a brilliant source of help. Some debts are good, while some are bad.
The problem only comes when we have too much debt and are struggling to pay them back.
When that happens, a thorough overhaul of your financial health is necessary to help you get back on track.
If you are trying to reduce your debts and work towards leading a debt-free life, here are some things you can do:
1. Reduce your expenditure: What are the things you don’t need?
It goes without saying that to save more money to repay those debts, you need to spend less. This means doing away with the unnecessary things in life, like lavish café brunches or the latest tech toys.
Go back to the basics of differentiating your ‘needs’ and ‘wants’, and spend only on the ‘needs’.
The best places to start are the significant cuts that will make you see and feel the difference. For example, skipping the café meals, downgrading a phone plan, or cancelling that cable TV subscription.
Living a simple lifestyle can be incredibly tough for those who are used to spending freely, but through it, you might also glean a new perspective on life – that happiness can be found even in simplicity.
2. Sell belongings you no longer use
When most people think of earning more money, they think about taking on multiple jobs. However, there are also ways you can earn a side income easily, such as selling belongings you no longer need.
Do you have that extra functional mobile phone lying around? Or a blender that you barely used? An extra laptop?
All these can be sold for a few hundred dollars and it can add up. Not to mention it helps you declutter and Marie-Kondo your home too!
With online marketplaces becoming more commonplace today, it is easier than before to sell off unwanted clothes, appliances, and more. It doesn’t take up much of your time, and you can negotiate deals even while holding down your day job.
3. Paying off high-interest debt early
Aside from finding ways to save and earn more money, the key to settling debts is also to tackle the problem strategically. The problem with debts is that they accumulate when they are not paid, whether in terms of interest fees or penalty fees.
If you incur too much debt, it will affect your credit score as well.
Thus, to ensure you don’t rack up even more liability, it is wise to pay off high-interest debts early. Another strategy you can take is to take a low-interest loan, like a personal loan to repay a high-interest loan, such as rolling credit card debts.
If you do so, even though you still have debt, the interest you accumulate won’t be as high.
4. Have multiple loans? Take a debt consolidation loan
When you have multiple outstanding debts, it can be very overwhelming trying to keep up with all of them and repay all on time.
A good way to solve this is to take up a debt consolidation loan. Most licensed money lenders in Singapore offer debt consolidation loans, which help people combine multiple debts into one. The debt consolidation plan will allow you to repay all your existing loans so you are only left with one loan to repay – the consolidation loan itself.
This makes it easier to pay and reduces the amount of interest across multiple loans. The repayment schedule of debt consolidation loans is usually also more long-term and flexible, so you can find one that matches your financial capability.
It is also important to take a loan in the right and smart way – remember, only borrow what you can repay!
5. Commit to a savings plan
Saving money can be difficult, but there are ways to make it easier. One option is to set a monthly savings goal and stick to it.
Alternatively, you can opt for a fixed savings plan or an endowment. By committing to these plans, you can allocate a specific percentage of your salary each month to these instruments. The funds will remain locked away until your plan reaches maturity, which could be years from now.
Although this can be challenging, it’s an effective way to save for your financial goals.
6. Invest your additional money
Don’t let inflation devalue your hard-earned savings. Once you’ve cleared all your debts and have built up a six-month emergency fund, consider investing to preserve your purchasing power.
Bank interest rates would not be enough to beat inflation, but working with a financial expert can help you make informed investment decisions that align with your goals and risk tolerance.
Keep in mind that investing always involves some level of risk, so it’s important to work with a trusted advisor who can guide you in making smart investment choices.
7. Make sure you are sufficiently insured
Emergency medical bills can create significant financial burdens if you do not have enough savings to cover the expenses. These unexpected and often high costs can lead to large amounts of debt.
By purchasing adequate insurance coverage, you can ensure that your medical bills are covered and that you will not have to worry about incurring debt to pay for these expenses. Insurance allows you to focus on the health and well-being of yourself and your family during difficult times.
When considering insurance options, it is important to assess your needs and choose a policy that best suits your circumstances. Depending on your age, health status, and lifestyle, you may require different types and amounts of coverage.
8. Speak to your loved ones about the importance of leading a prudent life
Leading a prudent life is crucial to avoid falling into debt, but sometimes, the extravagant lifestyle of family members can affect our own financial decisions. For instance, if a family member consistently prefers to dine at expensive restaurants or purchase luxury items.
Educating our loved ones on the significance of leading a prudent life is crucial. This means that each family member understands the importance of living within their means and making decisions that benefit the whole family in the long run.
By working towards a common goal of becoming debt-free, we can prioritize our financial well-being and make more informed decisions about our spending habits. Ultimately, this approach can help create a more secure and stable future for ourselves and our loved ones.
Goldstar Credit helps you get out of debt
It is not easy to get out of debt, especially if you have multiple debts. But with determination as you put your plans into action, you will be able to get there.
If you are struggling with multiple debts, you can get a debt consolidation loan with Goldstar Credit. We will be able to help you consolidate your multiple loans into a single loan, so you can repay it comfortably.
Our loan officers will also be happy to help you with financial planning and loan management advice as well.