Make a list of all of your bills, including your mortgage or rent, transportation, groceries, child support. Include debt payments, such as student loans, credit cards and car payment. Figure out your total monthly income. Include all income that you can use to pay your bills each month. This would include your paychecks, dividends from stocks, child support payments, gifts and inheritances and deferred compensation from a settlement or retirement plan. [1] X Research source If you are paid hourly, track your salary for a few weeks and calculate the average. This will give you an average monthly income figure you can use when creating your budget. Subtract your expenses from your income. This will tell you whether or not you are overspending. If you are spending more than you earn, then your need to prioritize your expenses. Make a plan to significantly reduce your spending. [2] X Expert Source Trent Larsen, CFP®Certified Financial Planner Expert Interview. 22 July 2020. Reducing how much you spend will leave you with more money at the end of the month that you can use to get out of debt or to build an emergency fund.
Practice intentional spending. Add in a budget for the entertainment or fun things that really bring you joy. For instance, you might opt to go out for an expensive dinner once a month with friends because you enjoy it, but then you decide not to travel or subscribe to magazines. [7] X Expert Source Benjamin PackardFinancial Advisor Expert Interview. 11 March 2020.
For example, suppose your rent payment gets debited to your account one or two days before your paycheck is deposited. Having that buffer means that your account won’t end up overdrawn, and you won’t be charged any overdraft or returned check fees. You should have this buffer even if you are in credit card debt. Keep the size of your buffer only as big as necessary. Channel all of you other extra income to paying down the debt. It can be hard to save up that buffer if you are living paycheck to paycheck. But you can do it if you cut down your expenses or find a way to earn a little extra money on the side.
Keep your emergency account separate from your checking account so that you’re not tempted to use it. Compare interest rates at different banks. Your local bank may offer as low as . 25 percent interest on a savings account. Online savings accounts offer much higher interest rates because they don’t have to pay the overhead expenses of maintaining a physical location. [13] X Research source
Plan to pay off debts with the highest interest rates first. [16] X Expert Source Benjamin PackardFinancial Advisor Expert Interview. 11 March 2020. Another option is to pay off the debts with the smallest balances first. This way you achieve goals of paying things off sooner. Student loans typically have low interest rates of below 6 percent. Unless the interest rates on your student loans are higher than 6 percent, there is no need to pay down this debt sooner. Continue making the minimum payments, and divert your other income into paying down higher-interest debt or into investments with a larger rate of return. [17] X Research source Be aware that there are ways to get student loans forgiven. Certain jobs, such as those in education and public service, and programs like AmeriCorps, may allow you to have some or all of your loans forgiven. You must meet specific criteria to qualify for loan forgiveness. Your mortgage, if you have one, is not considered bad debt.
For example, suppose you have a credit card with a $5,000 balance, a personal loan with a $7,000 balance and a car loan with a $15,000 balance. Your total bad debt is $27,000.
For example, suppose you have $27,000 in debt and you earn $48,000 per year. Your debt to income ratio is 56 percent ($27,000/ $48,000 = 56. 25).
Examples of peer-to-peer lending networks include Prosper and Lending Club.
Contact the National Foundation for Credit Counseling. They have reputable credit counselors who can help you make a plan to get out of debt. Avoid debt management scams. Many disreputable companies will try to charge you expensive fees or make promises they can’t keep. Never work with a company that charges upfront fees. Research debt management companies with the Better Business Bureau (BBB). Read the contract carefully so you fully understand how the company works. [23] X Research source
Freelance writing jobs include writing blog posts and generating content for content websites. Content sites pay around $. 03 per word, which would be $3 for 100 words. Writing guest blog posts might earn you up to $50 per post. If you have solid experience as a graphic artist, you could earn up to $100 per hour designing advertisements, website home pages, book covers, brochures or corporate reports. Create a website that states that you are available for hire and links to samples of your work and customer testimonials. If you have a digital SLR camera and can use photo editing software, you can earn money taking portraits, as a wedding photographer or by selling stock photos. Family and portrait photographers earn up to $100 per session. Wedding photographers can charge several thousand dollars. Stock photography pays between $. 15 and $. 50 per picture.
Make jewelry from conventional or unique materials. Remember to include the cost of materials and the time spent on the items when determining the price. Create holiday crafts for Easter, Christmas, Halloween and Valentine’s Day.
