An Easy Way of Getting Out of Debt

20 Apr

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how to get out of debt

Borrowing money can seem a simple way to solve your financial difficulties, but it’s not always the best. The ability to borrow money does not make this a good choice.

Unfortunately today the vast majority of questions financial experts receive are those about debts and credits. And the answer is always one of the simplest: try to cover your life expenses without credits.

However, it can be easier said than done. So you need to learn how to spend only the money you have earned and try to minimize the borrowing amounts.

Debt Estimations

Learning the financial statistic about the total governmental debt and debts of ordinary people can change your attitude to this option.

So financial advisors recommend to calculate the relation between the total debt and your pretax income, and this number should not exceed 37 percent. You can easily calculate this ratio by yourself:

1. Sum up all the debts you have: mortgage, car payment, student debt and credit cards.

2. Divide the annual pretax salary by 12 and you will get your monthly salary before taxes.

3. Take the monthly debt and divide by the calculated pretax salary.
When you have this ratio, you can determine your financial situation:
– Under 20% – healthy finance;
– 20 to 37% – such debt is normal for most people, also you are considered as a solvent person and lenders still can deal with you;
– 38 to 43% – overwhelming debt which puts you into the dangerous debt zone.

Leaving the Dangerous Zone

With such periodical calculation of your finance, you can use these easy tips to decrease your dependence on credits and begin to rely on your own money.

Spend Only Your Own Money

The first essential step to decreasing your dependence on loans is to prevent yourself from making the debt bigger all the time. You need to change your attitude to money and your debts. Buying things in credit is not a normal financial decision, and you need to understand this. So you should control your spending and reduce some unplanned purchases that influence your finance.

Plan and Execute.

Dealing with finance also means that you are aware of your situation and can make a clear calculation of all income and debts. And after this you can make a budget and plan all the necessary purchases. Also, it’s necessary to plan the repaying process according to the terms and conditions of your loan. For example, it’s always better to get rid of short-term loans at once to avoid high rates.

Make Savings

Controlling your spending is the first step on your way to the healthy finance. The second one is to make savings and create an emergency fund. Some experts agree that it’s possible to contact Vita Loans UK lenders 24/7 in a case of a real financial problem, however, this is not a solution for all financial difficulties. So you need to put some money to a special account and try to save up to 6 of your regular salaries. According to statistic, this is enough to secure yourself in a case of losing a job or getting ill.

Find a Source of Extra Income

If you can’t find additional work, you can always think about the other ways to get more money. For example, there is a simple rule: the money you don’t spend – you earn. Considering this fact, you can cancel some paid services, like cable TV, book clubs or sports membership. For the first period this can help you to accumulate more money and achieve your goal quicker.

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