Discover These Strategies To Manage Debt and Increase Your Income:
It’s a sad fact of modern life that there is such a compelling need to address this topic in our society. Poor financial literacy is widespread.
So many of us make ill-informed decisions and the result is a staggering number of people who feel constantly stressed out by their finances. Some studies put it as high as 70% of adults.
The significance of this is seen in the toll this stress has on personal health problems like depression and sleep disorders. When people feel trapped by their money problems, they suffer and often their families suffer too.
Add high levels of debt into the fix, particularly credit card debt, and the situation can become volatile. Sometimes leading to substance abuse, domestic violence and suicide.
Lets examine some of the ways you can manage your debts and increase your income by being more productive.
There are often limited options for many people to reduce their living expenses, so I am going to focus the first part of this article on ways to manage debt better to relieve some of the financial stress.
There is a HUGE difference between the stress of not earning enough to achieve your dreams and aspirations in life and the stress of not earning enough to meet your debt commitments.
Some of the steps I am going to mention will work better in situations where your debts are not completely out of control (yet) but intervention is needed now to maintain control. You may be meeting your interest repayments, but struggling to pay off the principal debt.
1. Understand the total amount of your debt.
This may seem obvious to some, but studies have found that a common defense mechanism to avoid debt stress is to not examine them. As if, the less we know about the size of the problem, then the less we will stress ourselves out! We need to look at our debts and work out which ones to tackle first.
2. Pay the debts with the higher interest rate FIRST.
Some ‘debt’ is probably costing you more than other debt. If you are planning to budget and attack your debt, then it makes sense to take on the one causing the most pain to your finances.
Often credit card debt or short-term loans will be the ones with the highest interest rates or stiff penalties if you default. Or you may have debt collectors calling you about an outstanding loan. Whatever it is, work on the most painful one/s first.
3. Consolidate your debts.
This may seem radical for some people, but it has helped many to get faster control of their money situation. It can help in a couple of ways. The overall interest rate of one loan may be lower than the individual debts; and a single monthly payment may be easier to manage and be more affordable.
Remember. The psychology of having one ‘problem’ rather than many problems helps many people to feel like they are starting to wrest back control again.
4. Cut up the credit cards and use Direct Debit.
Direct Debits can be your greatest ally in the fight against your debts. When all you have is the money left over after your direct debits have been deducted, then it forces you to budget.
5. Work out a budget that puts Debt First.
This can be a tough one to do in practice. But if you have the discipline to stick with it then you should really start to see progress on paying down your debts. The way to make it work is by really understanding what you weekly and monthly living expenses are.
You pay your debts first and live on what’s left over. In doing this you will be consciously prioritizing the financial outcomes you want to achieve.
Remember that with any course of action, your mind needs to be in the right place so that you can focus on what needs to be done. To help you with getting your mindset right, read my article on 5 Steps to Creating a Mindset for Money.
Think carefully about this statement. The degree to which we prosper is in direct proportion to our moneymaking skills and HOW we direct them for our long-term benefit.
Pretty obvious! Yet, how many people measure their value to an employer as an hourly or daily rate? If you want to increase your income, then find ways to increase your personal productivity.
Something that has always stuck in my mind is the concept of treating our career choices as if it were a business. Is there a business plan? What goals are you setting for up skilling?
Asked another way; what specific steps do you need to take to increase your ability to produce more, so that you can earn more?
Here are some ideas to get you started.
1. Increase your value to your employer.
Make it known that you are looking to increase your knowledge / skills so that you can add more value to your employer. Make sure it is understood that increased responsibility comes with an increased salary.
If your employer is reluctant or sincerely cannot find an opportunity for you, then find a new employer. Don’t accept the status quo! Always be planning the next step in your work, to build your personal productive value for an employer.
2. Start your own business.
Today there are so many ways to start and run a small enterprise. These can be ‘lower risk’ part-time ventures that get you started. You don’t necessarily need a large amount of capital to get started. What you will need is the spare time and the will to make it happen. There are many people who find small unique ways to earn some extra money.
The first goal for your venture may be to clear your debt. After that your goal may be to grow your business income to eventually replace your day job! Or, you could grow you savings to start being an investor. Either way, you would be creating the personal freedom that we all seem to aspire to.
For more inspiration, take a look at 6 Personal Development Goals For Work.
3. Become an investor.
The greatest potential to make money comes from being an investor. It is also the easiest way to lose money too! So, we must learn about the area we plan to invest in. It also helps to have a healthy dose of patience and self-discipline.
Most of us do not have a ‘successful mentor’ to guide us on the road, so we need to find the education from others. Think back to the earlier part of this article… At each stage of development we need to reinvest in ourselves (learn new skills) to progress to the next level of personal productivity and grow our income.
We live in an age of immediate gratification. However, if we want to be a successful investor we need to approach it strategically as a long-term exercise.
If you approach investing like gambling – in and out fast for a quick profit – then you will likely lose.
The important thing is that you first invest in yourself (knowledge) then in the market. Understand what you are investing in, and please do not rely on anyone else’s expert advice!
It’s your money, your future at stake, so get informed and think for yourself. Be productive and set your mind to exploring the many ways you can create additional sources of income.