Nowadays, one of the easiest ways to achieve your dreams is to make purchases and create assets with loans and credit cards. Anyone with a bank account and a suitable credit score is now able to fund their dreams with easily payable loan installments and credit card purchases.
But with so many credit cards and loans, are you struggling to pay off your debts? Did 2019 come and go, and you still feel burdened by the accumulation of unpaid debts? In the new year, if you have made a resolution to make an attempt towards clearing your debt, we have got you covered. With some excellent expert advice, we have collated a list of steps to help you get out of debt in the year 2020. But first, let us understand why it is that accumulating unpaid debt is so bad for you.
Debt is Bad for You
It need not be reiterated that debts take a severe toll on your financial stability and security not just in the present but over the long run as well. If 2019 was the year when you financed your dream purchases or expensive holidays with loans and credit card bills, the bills staring back at you are a cause for worry. A high debt-to-income ratio can cause more problems than you realize. Debts will affect your monthly expenses if the repayment amounts are high. At the same time, your savings will also take a hit.
Additionally, loans and credit card bills come with high-interest rates and finance charges, which add to the overall debt amount. If your earnings are not comparable to the debt you accumulated, it can land you in a severe financial crunch while also hitting your credit statement and credit score, which factor in liabilities and their repayment when evaluating an individual’s financial health.
Best way to get out debt in 2020
Getting out of debt is extremely important to ensure that you can achieve financial security in your future. If 2019 wasn’t your year in terms of debts, let the new year be the one where you can get out of the endless cycle and be financially secure. Here are some steps to guide you to get out of debt in 2020:
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- Find out how much debt you owe
The first step to getting out of debt in 2020 is to know precisely how much debt you owe. Get out all your documentation and learn how many loans you have taken, the mortgages you have taken out on assets, as well as the creditor to which you owe money.
Make a list of all debts in ascending order along with the interest rates applicable, the minimum amount to be paid, as well as the balance you owe. This information will give you a clear idea of when your debts are due, as well as help in making a concise plan to pay the debts off systematically.
- Collate a list of your income and expenses
Once you know how much debt you owe, you need to plan to pay them off. For this, you will need to make a list of all your income sources. When doing this, don’t just include your salary but also add income generated from dividends on stock options, rented property, salary bonuses, and any other income you may get in the year.
Then make a list of all your expenses, including your household expenses, money spent on dining out and entertainment, as well as savings, medical bills, loan installments, credit card bills, utilities, etc. You can also use expenses from the year 2019 to get a rough estimate of what it will cost you in monetary terms to meet all expenses in 2020.
- Plan a budget and stick to it
Now that you have a list of all your expenses and income sources, it is time to plan a budget to get rid of the debt. Budget planning is not an exercise to be restricted to the year 2020 but should be followed every year for financial stability. But since its better late than never, start budget preparations in 2020 by carefully allocating money for your different expenses from your total income. Depending on how high or low your debt is, you will need to prepare a budget plan where you can meet all your expenses, save money, and pay off your debt.
However, the most important step you need to take to get out of debt in 2020 is to stick to the budget you have made. No matter how difficult it might appear, with a little hard work and diligence, you can maintain your budget. Nowadays, you can also use a host of mobile apps that can help you keep track of your expenses and save enough to pay your dues.
- Try to cut back on Spending.
Let’s understand the fact that any money you save from your income after paying for expenses can be used to pay off debts. That is, the more you save, the more you can contribute towards paying off the debts. By this logic, if you cut back on your non-essential Spending, you can save to pay your dues. For instance, the amount you spend on your daily coffee at a café or in the office canteen may seem small, but in the matter of a month it comes up to a significant charge which can go towards paying off your debt. Therefore, this year, try to carry out an objective evaluation of your expenses and determine the ones you can do without. Additionally, try and find good bargains where you can save money. The amount you save will let you clear your debt.
- Make a debt pay-off calendar.
Once you have all the information on your debts, a great way to work towards paying them off is by maintaining a pay-off calendar. In the very first month of 2020, you can start marking precise dates on the schedule after determining which debts you would like to close off by what time. This timeline need not necessarily mean that you have to pay off all your debts by the end of 2020. All you need to do is set a deadline, which could be the next year or two years later, and this year, begin with allocating enough funds to meet your debt pay-off calendar deadlines.
- Use the snowball method.
An approved method of paying off debts is the snowball method, particularly if you have more than one account on which you owe money. In this method, you pay the minimum on all debts at their monthly due date. After that, any additional money you can arrange goes towards closing off the deficit with the lowest dues. In this way, one can eliminate debts systematically. For instance, a salary bonus received in the year can be used to close off a credit card loan while inheritance can pay off a car loan or a loan used to purchase that expensive television. Closing off the small dues will also motivate you to work better towards closing off all your debts eventually.
- Consolidate debts with a personal loan
If you think you have too many different loans to pay off, you can consolidate your debts by taking a personal loan. By choosing one loan to cover and pay off all other, or even some of your smaller debts, you can make your repayment easier. Instead of going for multiple debts, you can close off the small credit card dues with just one personal loan. If you are keen on taking this route to pay off your debts in 2020, you can obtain an instant personal loan at your fingertips with PaySense.
One of India’s leading online platforms for instant personal loans, PaySense lets you get a quick loan with a mobile app and their website. Just download and install the app on your phone, register yourself, upload your documents, and check your eligibility for loans up to Rs 5 lakhs. Once you are approved, calculate your tenure and EMI, and you can get the funds within a short time. PaySense has an EMI calculator that can be used to calculate the monthly installment for the loan.
Here you are then. Getting out of debt may seem like a daunting task, but with determination and effort, you can well be on your way to being debt-free shortly. Remember, with these steps to guide you through; you will be able to get out of debt in 2020.
Aahna Gandhi is an enthusiast traveller, writer and a PR Professional. She likes sharing memorable moments from her travels and inspire others to live a life full of wonder. Known for her content, she has worked for travel, technology, lifestyle, health sectors as well as finance.
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