Healthy tips that can help get out of hefty debts
Isn’t it surprising how so many people find it quite easy and fun getting into debt, but painfully difficult to get back out. In most cases, it only takes a month to incur thousands of dollars in debt, but decades to get out of debt. You find it more challenging to use your money well when you are in debt, and sometimes a very long time to pay off. Paying off a debt might require to combine different strategies to achieve that. IVA is one such strategy, and instead of worrying about the debt, you should rather worry about this: What is an IVA? A good understanding of the concept will help.
Stop creating more debt
Paying off a debt with another literally will not get you to be totally free from debt. This might only prevent your debts from getting worse, but, on the contrary, it wouldn’t help you make progress with clearing your debt. When you have your card with you, you might get tempted to pay some individual loans with it, with the hopes of gradually settling your credit card company. But, the truth is it will only rack up your debts. So it is advisable to either consider cutting up your credit card or freezing your credit.
Build an emergency fund
It might be somehow counterintuitive having emergency funds when you are trying to get out of debt since you could just use the funds you are saving to clear your debt. But with an emergency fund, you will be able to keep off from getting into more debts when any kind of an unexpected situation comes up. So if you do not get into any more debts, clearing the ones you have will be easier.
Withdraw from your retirement fund
When you are not yet up older than 59 years, withdrawing money from certain retirement plans bear withdrawal penalties and additional tax liability. Borrowing money from your retirement funds is also very risky, because you will have to pay back when you have a few months to leave where you are working. So this kind of money will only be helpful if you have an important debt to clear urgently since you will be paying the retirement funds depending on how much time you have at where you are working.
Increase your monthly payment
Paying exactly the monthly minimum on your debts will make paying off your debts quickly difficult. By the time you will be done clearing your debts, if you only meet the minimum payments, you will probably have paid double or even triple of the principal amount. It is only advisable to pay the minimum amount for your credit card when you have a debt payoff strategy that requires you to make a huge payment on one of your credit cards.
Cash out a life insurance policy
If you are registered for life insurance, you can withdraw your accumulated cash in your whole or universal life insurance. Take the money and use it to clear your debt. But withdrawing the funds sometimes might come with tax consequences. Borrowing from your insurance policy is also possible, but it may affect the death benefits your beneficiaries will receive.
Settle with your creditors
Renegotiating with your creditor is quite similar to making a deal with your creditor to pay a huge part of your debt at once or by instalments, and probably the remaining is cleared for you. But creditors agree to the deal on accounts that you are in default or at risk of defaulting. IVA can be adopted in this situation, so you just need to have a clear knowledge about: what’s an IVA?
Couponing is a great way to save money on things you don’t really need, but it can also be a great way to boost your debt repayment efforts. Challenge yourself to use as many coupons as you can when you go to a grocery shop. Then, reward your efforts by applying the money you saved toward your debt.
For a fact, we know that debts don’t stop us from living our normal lives. Even if it means you have to live a budget-oriented life, there are still times when you have to outsource your domestic chores. For instance, grass cutting, housekeeping, and small repairs. These are mini-chores that don’t require many technicalities, and can even be handled personally. So, instead of hiring someone to do these for you, why not consider doing it yourself? This will save you a lot, especially if you do these tasks often, say monthly. You can now channel the money saved into managing your debts efficiently.
The editorial unit
The financial information is not advice and should not be treated as such.