At some point in time or another, most of us have gotten debts – ranging from the innocuous couple of dollars borrowed from a friend to big-ticket ones like housing loans. Of course, not all debts are “bad”, for instance education loans or property loans, where money is borrowed to be placed in a sensible investment (most of the time!). Yet, there are certain debts we may fall into that should definitely be reduced or eliminated altogether if possible, such as credit card debts.
If you are currently in a financial predicament, you have to first and foremost have the conviction to start clearing your debts now. It is a dangerous and yet common misconception to tell yourself that you will pay off your debts when you start earning more in future. The longer you delay the payment of your debts, the more expensive it will get to pay it all off in the future (say hello to the bloodthirsty pest also known as interest).
Here’s how to get started:
1. Know Exactly What and How Much You Owe
Start off by listing down every single debt you owe, no matter how big or small, and whether they are “bad” or “good” loans. Sometimes when problems get too daunting, we have the tendency to escape reality by avoiding the truth. It is only wise to face reality right now, and muster up the conviction to climb your way out of debt. Thus, write down all your debts as explicitly as you can, in black and white.
2. Understand Where Your Money Is Going
Next, you need to find out exactly how much money you can put aside for debt repayment every month. To do that, you need to know where all your money keeps disappearing to after you get your pay check.
Can’t remember exactly where all your money has been going? Start tracking your daily expenses for a month. This will give you a brief on areas which you can afford to cut down on – the mysterious “black holes” might have been expensive cab fares, or those once-too-occasional drinking sessions with friends.
3. Make A Payment Target
Now that you know how much you have to pay off, and the spare cash you have left at the end of each month to pay debts, you can start making a payment target. It is good to stretch yourself by trying to cut down spending on unnecessary items for now. However, don’t try to be overly-ambitious and stress yourself further by setting unachievable targets. Try an online calculator like Unbury us, which lets you compare between two types of payment methods to see how long you’ll take to repay your debt, and the total interest you would have incurred along the way.
4. Look For Help to Keep Yourself On Task
Now that you have your target, how will you reach your goal?
To stay within your budget, download spending tracker apps on your phone to monitor your spending while on the go. Try apps like “Monny” (currently only available on iPhone) to help track your expenses. We all know the effects of going cashless these days -- we don’t feel the pinch from spending that easily. It’s good to keep your spending in check from time to time and work towards a monthly spending goal.
Also, look to friends and family for little nuggets of wisdom. You’ll never know whether a thrifty aunt or the frugal uncle has a little saving trick up their sleeve. It is definitely not easy facing the struggle of a debt, especially when it seems too huge to handle. Some support from your loved ones would provide you with encouragement and help you ease your burdens.
Commit to getting out of debt. Admittedly, it is hard. You need discipline, sacrifice, and might sometimes face a little discomfort as you adjust to new lifestyle habits.
There is always an emotional element in resolving debt problems. You may lose sleep over them. Never be afraid or hesitate in looking for help. There are organisations in Singapore which you can get help from, both emotionally and practically. For instance, Credit Counselling Singapore provides credit counselling and facilitates debt restructuring of individuals with their creditors. With support from people who understand your financial situation and are as committed as you to solve it with you, it will definitely be an easier journey to walk down.
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