Content

• Steps
• Part 1 of 3: Creating a Plan
• Part 2 of 3: Paying off Debts
• Part 3 of 3: Avoiding debt
• Tips
• Warnings

Are you in a lot of debt? Do you want to pay off your debts and feel free? Do you think that it is difficult or even impossible to pay off all debts? This article will show you how to develop a strategy for paying off debts and how to manage them.

Steps

Part 1 of 3: Creating a Plan

1. 1 Assess your concerns. If you're in a lot of debt, don't give up! First, calculate how much and to whom you owe in order to make a plan to pay off your debts and improve your life.
   • Credit card, car loan, and mortgage debts are at the core of most people's debt. Add these debts together to determine the total amount of your debt.
2. 2 Rank your debts according to their importance. First, identify the loans with the highest interest rates.
   • An outstanding loan with a high interest rate increases over time much faster than other loans. Therefore, you first need to focus on repaying a loan with a high interest rate; otherwise, it will be more difficult for you to pay it back.
3. 3 Develop a debt settlement plan. Think and find the most efficient way to pay off your loans.
   • If the interest on one of the loans is higher than on the others, pay off that loan first. Pay the minimum amount possible for the rest of your debts. In the financial arena, this is called “building the ladder,” which allows for the most efficient debt management.
   • If the interest rates on your loans are about the same, pay off the smallest loan first (the “inverted ladder”). This will allow you to quickly reduce your total debt and believe that you can get rid of it.
4. 4 Consolidate loans. The paperwork related to loans takes a lot of time and effort. Therefore, it is best to contact a financial advisor who can help you consolidate your loan payments, which will allow you to make one monthly payment.
   • You may be able to get the interest rate down on some loans or give you a grace period to pay off certain debts. In some cases, when the payment of debt is deferred for some time, interest is not charged. Thus, you will be able to repay the loan without significant growth.

Part 2 of 3: Paying off Debts

1. 1 Make a budget. To do this, calculate your monthly income and monthly expenses (for food, rent, utility bills, and payments for the most significant loans).
   • Try to cut back on your spending so that more money is spent on paying off debts (this way you will pay off your debts faster). Strictly follow your budget.
   • If your expenses exceed your income, either cut expenses or start earning more. In some situations, you can both cut costs and increase income (for example, by finding an additional job or asking for a wage increase).
2. 2 Reduce costs. By learning to spend less and save more, you can pay off debt faster.
   • Cut back on food costs. Don't eat in cafes and restaurants, buy cheap groceries and learn to cook great meals. And remember, homemade food is much healthier than fast food.
   • Cut back on entertainment expenses. Do you really need cable TV? Are nightclubs and restaurants obligatory? Find ways to spend your time cheaply.
3. 3 Use additional income to pay off debts. Earned more than usual this week? You can go to a nightclub or pay off some of the debt. Received an award? You can buy a bunch of gifts or make a loan repayment. If you want to free yourself from the burden of debt, be strict with yourself. Don't allow yourself to waste money on things that you don't really need.
4. 4 Save money. If your income exceeds your expenses, save for unforeseen situations and other expenses that can lead you into debt.
   • Create a savings goal. Even if it's only a few thousand rubles, you will learn to save money and not waste it. Get into the habit of saving, not spending.
5. 5 If you are eligible for a tax refund, use it and use the funds received to pay off debts. Don't think that you will be rich in tax refunds, but even that money will help you reduce your debt burden.

Part 3 of 3: Avoiding debt

1. 1 Change your behavior. If you want to free yourself from debt burden, do not waste money on irrelevant things and do not buy what you cannot afford. If you can't pay for something in cash, you don't need it.
   • Being free of debt doesn't mean being a curmudgeon. If you want to spend some money, go for it. But make sure that your expenses do not exceed your income and that you do not run into more debt.
2. 2 Make savings. With each paycheck, set aside money for necessary (food, utility bills, etc.) and other expenses, and use the remaining funds to save. It is important that you are able to buy what you want without incurring debt.
3. 3 Live within your means. Many people go into debt because they think they deserve a certain quality of life (status). They buy expensive cars, jewelry and go to expensive resorts, and then pay off their debts all their lives. Learn to be content with what you have. Think about the fact that you live on your own money and that you should not give someone a part of it.
4. 4 Lead a healthy lifestyle. Debts for medical treatment can undermine the financial condition of even well-to-do people. Eat well and exercise to avoid costly treatment debts.
   • Buy health insurance to protect yourself from over-spending.
5. 5 After paying off your debts, do not accumulate them. If you want to buy something, take out a loan and start repaying it without delay. After paying off the debt, you can take another loan (but not earlier!).

Tips

• Avoid Credit Cards! Seriously! The easiest way to avoid debt is to never buy anything on credit. If you are absolutely convinced that you need a credit card (to "help" you earn a credit history), use the card only for those purchases that you could buy without a credit card with the funds available to you. Pay the full amount by credit card every month. Do not leave any unpaid balance on which interest will begin to accrue, and in no case do not delay payments, for which you will be charged an additional fee. All these expenses are absolutely unnecessary. This way you can earn yourself a good credit history without debt.
• Cook at home. You can save on food and eat healthier foods.
• Spend as little as possible.
• Use discount coupons and stock up (when you see some of the staples on sale) to keep within budget.
• Budget your expenses. Plan ahead how you are going to spend your paycheck.
• Find a hobby that doesn't cost money.
• Save, find additional sources of income, and try not to spend more than you earn. This will help you get rid of debt faster.
• Buy limited-life items (sports equipment, home and leisure goods, school supplies) and those that your kids will grow up to quickly through message boards. You can also find ads for exchanging similar things.
• To spend less on gas, walk, bike, or skateboard.

Warnings

• Do not fall under the illusion that flaunting your wealthy lifestyle in your younger years can help you become richer and find wealthy friends. Nobody cares about your acquisitions, and if it is important to them, then they themselves are insecure. If you love beautiful things, buy the ones you really need and pay in cash.