How to Solve Debt Financial Solutions
Finding financial solutions to solve debt is more important than ever. It may seem daunting when you realize just how much debt you are in, but you must start somewhere. There are ways out, though. With the proper management of adequate income, no unnecessary spending and slimming down your lifestyle, it certainly can be done.
The Snowball Financial Solution
- Create a budget on a piece of paper or in MS Excel. List your income down one side and your expenses and debts down the other one.
- Tally each side and subtract your debt figure from your income figure. This is excess income. If there is no excess income, take immediate action to generate income or reduce expenses. This may mean returning items to the store that you don't need. There is a difference between needs and wants. Your needs are basic housing, food, transportation and clothing.
- List your debt payments, meaning credit cards and loan payments, in order of which will be paid off the soonest.
- Make the minimum payments on all debt payments except for the one to be paid off the soonest.
- Take all excess income and apply it additionally to that debt payment. This speeds up how quickly it is paid off.
- Pay yourself. Take out just $10 a week or as much as you can and stash it away. This is the start of your nest egg.
- Once that one is paid off, tackle the second one by adding the amount you were paying on the first one in addition to the minimum payment.
- Repeat this process down through the list. This is called the snowball method because the amount of money you are paying on debt snowballs as you go through the list. You pay it off faster and save thousands in interest.
- Do not generate more debt. This is the key to staying debt free and building a financial nest egg.
- Buy only with cash from now on.