Insolvency is a term see when you are unable to pay off any debts you have and therefore fall into a void where you are trapped without means of getting out. It can be a life changing thing for many people and makes things incredibly difficult for many.
When you end up in this rut it can be difficult to think of finding a way back out; but it is important to remember that absolutely anything is possible if you simply start creating better habits in your life. If you feel as if you need help with insolvency this year, here are some of the ways you can prevent it from happening again and also dig yourself out of the rut.
Stop Borrowing
The most important thing you need to remember is that borrowing money will only lead you to have to pay it back. It means that if you are already in debt and to borrow more money, you land yourself deeper in debt. The trick to staying financially stable and digging yourself out of this hole is to stop borrowing money and instead focus on getting rid of your current debt. It might sound very obvious to you, however it is something many people don’t think about. It is often all too easy to keep on borrowing when you are used to borrowing money.
Budget
Budgeting is something which you need to do if you want to stay afloat and keep your finances stable throughout the year. It is important to set yourself a budget for every aspect of your life because it will enable you to spend money while also not worrying about getting into debt. For example for your food shopping each week let’s say you set yourself a budget of $100. This will be a goal to stick to and will mean you have extra money left over for savings or to use in your lifestyle. Understanding how to budget and making a conscious effort is crucial for better financial health.
Focus on Needs
When you are trying to get yourself out of debt, make sure you always focus on the things you actually need rather than what you want. Sure, it’s great getting a takeaway when you don’t want to cook or popping out to the cinema, but when you are in debt these are things you need to cut down on a lot, if not completely. Save the money you would have spent on these activities and use it to pay off your existing debts.
Talk to your Creditors
If you keep quiet as you begin to have problems with laying off your debts each month, you won’t get the help that you need to get back on track and be able to pay them off. The best thing you can do if you find yourself in trouble is talk to your creditors and ask them for advice on what to do. They will be able to set up a meeting with you to discuss how much you are able to pay every month, and this will mean that you pay off less each month for a longer period.
Check Interest Rates
If you have multiple debts to your name at the moment you will want to prioritise which debts you focus on paying back first. Always focus on the highest interest rates first because this is where a lump sum will build up much quicker for you to pay off. If you can pay off these debts first, it means that you have more time to focus on the lower interest rates because they won’t build up as quickly for you, therefore they will be easier to handle.
Consolidation
Debt consolidation isn’t necessarily the best option for everyone out there, but it might be just the thing you need to make paying off your debts and getting back on track with your finances easier. Debt consolidation involves you taking all of your existing debts and merging them into one large lump sum with monthly payments which are higher. It will usually mean that your payment term is longer than the single debt, but it will make things less complicated for you and will mean you only have one interest rate to worry about. It should make paying off your debts easier in the long term and get you back on track with your money.
