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Are you knee-deep in debt and don’t know what to do? Use these simple strategies to take back control of your financial future. In today’s world, everyone seems to be in debt. There are credit cards, bank loans, student loans, shy-lock debts, pending unpaid bills and money owed to friends. Even countries’ economies are buckling under the weight of credit. If you are balancing such financial responsibilities, as most people are, you know that it can be a very stressful experience.

When you are deep in debt and lack sufficient savings, any financial setback – like your car breaking down or your child falling ill – can bring your world crashing down. Unpaid credit gives you emotional stress, which can lead to physical illness. It also holds you back from pursuing your goals, lowers your self-esteem, makes you feel powerless, and can even lead to marital breakdown. What’s even worse is that debt has a way of leading into more debt. This can be in the form of fines, penalties, or accruing interest. You can also get into additional debt when you borrow from one source to pay off another and end up trapped in a vicious cycle of debt!

If you are knee-deep in debt, it is easy to give up hope. The good news is that it is possible to free yourself from debt. Here are ways to get back control of your financial future by clearing your debt.

List Your Debts

Create a list of everything you owe – from the biggest to the smallest. This can be a painful exercise but it is quite necessary. List the debt in one column and in another column, list the minimum monthly payments expected by the creditor and the interest rates. Laying out this information clearly on a piece of paper will help you get a better perspective on your debts and how to pay them off. Armed with your debt list, decide which debts are most urgent and work on paying them off first. Also, prioritise paying off the debts with the highest interest rates to avoid getting into even more debt. If you can afford to, pay more than the minimum expected so you can shorten the payoff period. When you pay off debt #1, you can now focus on the second one and so on. Secondly, focus on the small debts and figure out a way of paying them off simultaneously with at least on big debt. Small debts, especially if owed to family and friends, can strain relationships so you will be happier when you clear them.

Create a Budget

This is a simple step but it is the most powerful tool in regaining control of your finances. You need to have a budget on how you are going to spend your income, down to the last penny. Having a precise budget and adhering to it can help you curb overspending while ensuring that you take care of the basic bills.

When you have written down your budget, you can also scrutinize it to see where you can cut costs to help you pay off debt. In your budget, include the amount you have allocated every month towards paying off your debts. If you are strict with your budget, you should have a few extra dollars to dedicate to paying off debts that would have gone to unnecessary spending. You can write your budget on a notebook, use a simple spreadsheet on your laptop, or download a good budgeting app on your phone or tablet.

Change Your Habits

We are not judging but chances are that it’s your bad money habits which got you into debt in the first place. To dig yourself out, you need to adopt new money habits. The key to changing your money habits is differentiating your needs from your wants. Do you really need expensive designer jeans? What about buying the latest iPhone? Can you do without eating at fancy restaurants? Also look at the expenses you can do without such as unused gym subscription or expensive cable subscription to channels you don’t even watch and cut them out. If possible, avoid getting into any more debt. Live within your means and most likely, you will never have to worry about facing major debt again.

Use Unexpected Money And Bonuses

If you get any unexpected money – such as friends and relatives gifting you cash for your birthday, or you get a raise- don’t use the money to treat yourself to a designer bag but allocate it to clearing your debt instead. While at it, you can also sell unwanted gifts and household items to create more money.

Don’t succumb to the temptation of using the unexpected money on unnecessary expenses; you will get more satisfaction from clearing your debt anyway. The trick is to spend unexpected money on paying the debt immediately after getting it to avoid temptation. For example, you can make online or mobile payments as soon as possible.

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