By Ricky Singh, Founder of SupplyLife
The past year has no doubt caused financial difficulties for many whether this is due to a loss of job, health or increased responsibilities. However, you can overcome personal finance issues and debt this year and be in a better place financially, this article will provide you insight on ways you can do just that.
Be realistic with your finances
The first step to overcoming personal finance problems is to be honest with yourself. You can do so by setting up a budget, this way you can see what your income is and what you are spending on. By setting up a budget you're less likely to end up in debt, overspend or go into your savings to cover unexpected costs and you are more likely to have a good credit score which makes you more desirable to be accepted for a mortgage or loan.
It may not be realistic to cut back on one major expense, but you could identify three to five expenses you could reduce such as subscription services and household bills. Could you perhaps find another provider who offers cheaper tariffs? If so, consider switching to another provider to reduce your expenditure and you could see yourself saving up to a couple hundred. Keeping to your budget is not an easy task and you may slip up on some days, if this is the case, just remember to live by your means and to not spend more than you earn. However, if you find yourself overspending more than needed it may be necessary to revisit your budget and adjust your behaviour, such as resisting the need to buy impulsively, hold off on purchasing the newest release. Or it could be the small things like not going grocery shopping when you're hungry.
Taking care of your health is one way you can improve your personal finances. For example by limiting takeaways and junk food, not only will you be physically and mentally healthier but you will also be spending less on food. Hence you can look into cooking more often during the week and treat yourself to a takeaway once in a while. Furthermore, by looking after your health you may be able to bring down the cost of your health insurance plan and medical bills, allowing you to save for rainy days or put the money towards paying off any debts.
Seek advice and lean on your support system
Relying on your friends and family can help you to overcome financial difficulties, by sharing your goals with them they are more likely to keep you on track. Additionally, you can look into seeking professional financial advice from an advisor as they will be able to give you trusted information tailored to your situation and could put you on a payment plan enabling you to pay off your debt with more ease.
How to pay off debts in 2021
There are many approaches to take when it comes to paying off debt, however below we will just take a look at three main ways as outlined below.
The first method is known as the Avalanche, this involves paying the debt with the highest interest rate first through to the ones with the lowest.
Another method is the Snowball approach, here, you will pay the debt with the lowest balance first followed by the next debt, keep doing this until you've paid off all your debts from smallest to largest.
Balance transfer is yet another way to pay off credit card debt. In order to do this, transfer the balance from an account with a high interest rate to a card with a lower interest rate. By doing this you are essentially paying off one credit card using another card.
No matter which approach you decide to take to pay off your debt, just ensure you never miss a payment as this could affect your credit rating and you will accumulate more unnecessary costs.
Consider increasing your income
You may have expertise in a particular field of work which is of demand. If circumstances permit, why not consider whether it would be sensible for you to increase your income? Could you change jobs where you are able to earn a higher paying salary? Could you use your skills to become a freelancer or work remotely? This way you could earn some extra cash outside of your main job.
In conclusion, take it easy on yourself and keep in mind that small steps go a long way when getting into a better financial position. Adopting a positive outlook will really help you deal with financial issues rather than believing that you are stuck and don't have enough money to achieve your goals. Don't stress out about it afterall we are living in very difficult times but by putting together a realistic plan that works for you, you will soon overcome personal finance issues and debt.