We are constantly bombarded by ads. Whenever we look there is advertising trying to entice us to spend. It is no wonder that advertisement and the availability of credit keeps on driving individuals into debt.
A recent research in Australia shows that the combined credit card debt is higher that house mortgage in the country. We shouldn't try to read too much from those statistics because it includes families that rent, and therefore don't have a mortgage. Nevertheless it is an indication of a big problem lurking around our societies.
Following are a few tips on how to pay off debt.
Manage your cash flow
The most important aspect of your finances is your cash flow. If you don't know what cash flow is click here (come back immediately after you finish reading it).
In summary cash flow is the management of the money coming in and going out. You need to have sufficient cash coming in to cover for the expenses. The first step is to know how much money you earn and how much money you spend on a weekly, fortnightly or monthly basis. Once you know your cash flow position you can start to take action to pay the debt.
Any extra income you earn should be channeled to pay off the debt. Don't keep on paying the minimum amount, pay as much as possible so that interest is reduced and you will pay off the debt faster.
What if your cash flow is negative?
Unfortunately many people find themselves with debt and not enough income to pay the debt, in summary, the total expenditure is higher than the income. As a result you probably have to use your credit card to boost your cash flow until you get paid. Once pay day comes around, you pay a little of the credit card debt off and the vicious cycle starts again.
The danger of falling into this scenario is that you probably have a perception that everything is fine. You always pay all your bills, including some of the credit card debt, and you think you don't have financial issues.
The answer is unfortunately very simple, if your cash flow is negative you need more money either by cutting expenses or by earning more money.
Cutting your expenses
Earning more money
The easiest way to earn more money is to work more. Nobody wants to do that, you already work enough during the week, you don't want to find another job during the weekend or at night time.
Unfortunately you need to find other sources of income to get your cash flow in a positive scenario so that you can reduce your debt and start saving.
You are not limited to finding another job, you can get creative and open up a low cost business from home where you can be around your family and still work during the weekend. Other options for alternatives sources of income include:
There are many other tips and advices I could provide to help you to get out of debt including debt consolidation, drawing money from your mortgage to pay off unsecured debs and others.
The most important advice is to take action to ensure that you have a positive cash flow and tat you pay off the debt. It is possible.