Falling into the debt cycle is like riding a bike downhill with no brakes! When you get on that downhill roll, the wheels spin faster and before you know it, the situation is out of control! For most people in debt, that debt hangs over them, their happiness and lifestyle is severely impacted, and it's not something that anyone wants to share with their friends or family. Perhaps the most difficult part of breaking the debt cycle is having to justify changes in spending to others, particularly if one has become accustomed to enjoying lavish things.
In this post, we will discuss how to break debt cycle so that you can get out of debt, and get back on track financially.
7 Tips to Break the Debt Cycle
1. Debt Relief: Find Your WHY!
Find a powerful reason for why you really need to break your debt cycle. This big WHY can serve as a reminder when you are about to spend money on items you don't need.
Write it down and put it in a place where you see it and are reminded (like in your wallet). You have to have a WHY in order to make a habit.
Some examples of strong “whys” can be the education of your kids, investment goals, savings goals, business, travel dreams, or you simply want to live in peace.
2. Get out of Debt: Stop Thinking "I will pay it off later".
Be honest with yourself and acknowledge that "later" never comes. Delaying the inevitable is never a good idea.
Kind of like throwing rocks in your own path, at some point you are going to have to climb over these obstacles.
Care more about your future self. It might be easier said than done for those who want what they want and want it now!
But you will want things in the future, too! How many things have you bought in the past, which now live in the cupboard!
3. Tips to Break the Debt Cycle: Create a Budget.
Create a budget and place it somewhere you can see easily! For example, you could print it out and put it on the back of your toilet door, on your bathroom mirror or even on your refrigerator.
Many people take the time to write a budget, however more often than not it will sit in an Excel file or in a notebook untouched and gather dust. By placing your budget in plain sight, this serves as a reminder you want to be wiser with your money - don ‘t let “out of sight, out of mind” come into effect when you are trying to budget!
Write it up, pin it up, use it as part of your WHY and act on it. There are many budget apps you can download which also send you spending notifications.
4. Payday Loans Australia: Live Within Your Means.
We all have that one friend, who has to have the latest of everything. Maybe they have the money, maybe they don’t – but that’s not for you to worry about.
What does matter is that you don‘t allow yourself to consciously, or subconsciously, get caught up in the competition of who has the newest, best, prettiest, fastest or most awesome things.
Live within your means, don’t borrow any more money or get sucked into payday loans, and you will find satisfaction and abundance in many other ways!
5. Minimise Your Spending: Stop Wanting Stuff You Can‘t Afford.
As above. It is okay to ogle nice things in magazines, but in the end, they are just things which eventually will gather dust, depreciate, break, or become outdated.
Fashion doesn‘t last long, so if the object of your desire is a fad such as a fashion item or a piece of technology, and you really can‘t afford it, then by buying it you ultimately end up furthering your debt and cluttering your life.
A good exercise is to audit your possessions for items you spent a lot of money on 12 months or 2 years ago, work out if you really got value or happiness from having it and ask yourself whether it is still giving you that happiness or value. More often than not you will feel guilty for wasting so much money, which will be sure to help you find that why!
Are you guilty of impulse shopping? Check out our article: "7 Tips on How to Mentally Deal With Impulse Buying".
6. Insurance for the Future: Start an Emergency Fund.
This is one of our best tips to break the debt cycle! Further to creating a budget, it’s possible to account for emergencies in advance by setting up an emergency fund!
To start one, save $1000 minimum and keep it in an account with a different bank. Then decide on a weekly amount to add to that fund, and stash it away.
Top up your emergency fund with your tax return, overtime, birthday money or extra cash earned by doing a side hustle. You never know when you’ll need to make an insurance claim, fly somewhere on short notice or pay an unexpected bill.
Having an emergency buffer in place protects you from having to dip into your savings when something inevitably goes wrong, and especially protects you from going into debt!
7. Boost Your Bottom Line: Get an Extra Income Source (Side Hustle).
Getting an extra source of income is a great way to help dig yourself out of a debt hole!
Whether a part-time job after work or freelance jobs like writing, programming, or digital arts – most people have skills outside of their career that can be used to generate cash.
Even hobbies can make you money – for example, by creating crafts and then selling them online. From online surveys to cashing in cans and bottles – there are hundreds of ways to make extra money on the side!
All you need is grit and determination! Looking for some side hustle ideas? Check out this article by Forbes - The 9 Best Side Hustles For 2021.
8. Financial Debt Help: Recall your WHY!
Keep remembering that WHY you started out with, as it is the KEY to breaking the cycle and creating new spending and saving habits for life!
What happens when you have broken the cycle and finally pay your debt off? Don‘t drop back into spending! Instead, see a financial planner who can help you get started on your journey to building wealth!
However, if you are still in debt and no matter how hard you try, can’t seem to break out of it, seeing a debt assistance professional such as Credit Counsellors is going to be the best move so that you can ensure you’re receiving quality financial debt help and can get back to having a clean slate financially.