Getting into debt is one thing, but getting back out of it is quite another. And if you’ve ever Googled ‘how to get out of debt quickly on my own,’ you know just how vast the school of thought has become.
While there’s not necessarily a one-size-fits-all approach to paying off debt, certain activities will make or break your approach to a speedy recovery. What exactly affects the way you pay off your debts, and are there some things you should avoid altogether?
We’ll answer all that and more. Let’s explore how to get out of debt the right way by looking at some common mistakes and pitfalls made in the process.
How to get out of debt quickly: the mistakes people make
If you’re fired up to get out of debt, congratulations! Here at Salt and Lime, we’re passionate about helping people get on a path toward a bright financial future. However, we also don’t want you to burn both ends of the candle too fast. To make your debt repayment process as smooth and stress-free as possible, we’d recommend avoiding these common patterns that hinder rather than help you become debt-free.
There are five main ways people tend to stumble when getting out of debt.
1. They try to get out of debt quick — too quick
In a world of instant gratification, getting out of debt fast sounds like a great plan. And why wouldn’t it? Regaining control of your finances is an exciting concept, and something everyone wants to have.
But if you’re not approaching debt repayment sustainably, you might become frustrated or burnt out before reaching your goal. Rather than focusing on the speed at which you can pay down debts, consider how fast you can pay your bills in a sustainable way. Ask yourself:
How much can I pay per month without straining the rest of my finances?
What’s a tentative deadline that I can hit? One year? Two? What about five?
Can I increase my payments to shave extra off the principal?
As you’ve probably heard before, slow and steady wins the race. Stay confident and consistent, and watch those debts start winding down.
2. They don’t read up on money-saving tips
You don’t need to be a financial expert to get out of debt, but reading content from people who are experts certainly won’t hurt! This includes reading up on how to avoid debt, ways to cut expenses, and how to set up budgets (more on that later).
If you’re looking for some solid financial resources, we recommend:
The Salt and Lime Blog — This resource is chock-full of detailed information all about getting out of debt. Plus, if you take out a debt consolidation loan with us, we’ll even send you some financial wellbeing modules for free!
Mint — If you’re looking for ways to read about and catch up with financial literacy, Mint can help! You can also start a budget for free and manage it across different devices.
Balance Finance — This is a great place to start for all things finance. Some banks also provide access to Balance’s online webinars and other resources, making it a no-brainer for financial awareness.
And don’t forget: you can also find plenty of resources via podcasts and videos!
3. They don’t set a personal money budget
Did you know that 86% of Australians don’t know how much they’re spending every month? It’s true! That’s why creating a budget can help cut back on erroneous expenses and get you closer to a debt-free future.
There are a few methods of building a personal budget:
Zero-Based — Budgeting every last penny.
Envelope System — Filling envelopes with cash for the month.
Pay Yourself First — Adding money to your account before paying anything else.
No matter what system you choose, choose to stick with it!
4. They don’t have an emergency fund
Emergencies can and will happen during your lifetime. In fact, emergencies are one of the biggest reasons why Australians fall into debt in the first place. Unfortunately, we tend to forget about emergencies before they happen. One in three Australians can’t handle a financial emergency of $500! It’s a relatively small number, but one that could lock them back into the cycle of debt.
So as you work toward making repayments, don’t forget to save something on the side for emergencies. About $1,000 in a savings account should do the trick!
5. They don’t consolidate their high interest debts
Debt consolidation is one of the best ways to end high-interest debt spirals.
If your liabilities are less than 50% of your income, a loan may be just what you need to make progress on your principle.
Why consolidate debt? For more reasons than you might think.
Debt consolidation may lower your interest rates.
Debt consolidation may help you make progress faster.
Debt consolidation may rebuild your credit score.
Rarely, some debt consolidation providers (including Salt and Lime) provide regular rate discounts from financial wellbeing modules to help borrowers save even more.
Get out of debt quickly with Salt and Lime
Escaping the cycle of debt is a lot like climbing a mountain — it takes one step at a time to get where you want to go. It may not be an instant process, but you’ll most certainly reach the summit (perhaps sooner than you think)!
As you move forward along your journey, don’t hesitate to get plugged into the resources and tools you need to succeed — including the debt consolidation loans at Salt and Lime.
Whether you’re looking to get out of credit card debt or just escape the endless spiral, the pros at Salt and Lime will be standing by to help. Our accessible debt consolidation programs help slash your high-interest debts with a convenient monthly payment, backed by holistic financial wellbeing modules that have your needs in mind.
Move forward with a debt consolidation loan that’s one step closer to financial independence. Just submit an online application to the team at Salt and Lime, and we’ll take care of the rest!