Most people know that getting out of debt means making a budget, spending less, and saving more. However, it’s easier said than done. Make a dent in your debt with these five tips and get back into the black sooner!
1. Find a side hustle
Looking for a way earn some extra income? There’s an app for that!
Making a little extra cash has never been easier. Teach English to kids in China online with VIPKid. If you’re a shutterbug, earn money for your photos with Clashot. Use Mylo to invest your spare change. Sell items you don’t need on Facebook Marketplace or Kijiji.
No matter what you have to offer, there’s probably an app to help you turn it into a little extra income.
2. Use cash to your advantage
Credit cards and e-payments make spending money very easy. When you need to purchase something, pay for it with cash instead; seeing your $20 bill disappear will help you to spend less. A study from MIT showed that shoppers can spend up to 100% more when using their credit card instead of cash.1 Not only is it harder to overspend when you run out of cash, you immediately see the real cost—with a credit card, you only feel the pain when you see your statement at the end of the month.2
Leave the credit card at home and use cash—you’ll save money without even trying!
3. Prioritize purchases that bring joy
Sticking to a budget is like sustaining a healthy diet. You’ll be more successful in the long run if you plan to occasionally treat yourself, instead of trying to completely give up the things you enjoy.
Does buying a three-dollar coffee every day really bring you joy? Or could you get the same satisfaction by brewing a cup at home and using the $60 a month you save to go to your favourite restaurant, save for a vacation, or buy a new outfit instead?
If you intentionally plan for what you want to splurge on, you won’t be as tempted to spend extra money on impulse buys.
4. Make a plan to attack your debt
Making the minimum payments on your bills isn’t going to get you anywhere fast. Identify which of your debts has the highest interest rate and pay as much as you can afford above the minimum payment until it’s paid off. Typically, credit cards and high interest loans are a good place to start. Once that’s paid off, move on to the debt with the next highest interest rate, and so on.
Focusing on one debt at a time can be less overwhelming, and being able to cross a debt off your list is very satisfying!
5. Expect the unexpected
Even the best laid financial plans can be derailed when an emergency happens, such as a car accident, theft, or a leaky roof. Having the right insurance coverage is an excellent way to protect yourself from unexpected expenses. Knowing that your insurance provider will be there to cover the costs of an insured loss can be a major stress reliever and help you keep your debt under control.
You should also have an emergency fund of three to six months’ worth of living expenses saved up that you can access for unplanned emergency costs. That way you have a cushion to fall back on instead of adding another high-interest loan to your existing debt.
To ensure your policy provides the right amount of coverage, contact an OTIP insurance broker at 1-800-267-6847 today.
1. Marketing Letters, Prelec & Simester
2. Psychology Today