Debt Spiral: 4 Strategic Ways to Rise Above Financial Obligations

How do you get out of a spiraling debt?

1. Recognize the Spiral
2. Save for Emergencies
3. Don’t Buy the Maximum Allowed on Credit Cards
4. Construct a Debt Repayment Strategy

Debt is the number one root cause of significant problems that prevent many from reaching the financial success they work so hard for. Between credit card debts, car loans, gadget loans, and other borrowed money to purchase an item or service, it is easy to find yourself confined in a debt spiral.

Fortunately, there are plenty of strategies you can employ to get out of the cycle. Climbing out of the spiral and maintaining financial stability and discipline gets easier every time you pay off a debt. Read through if you are ready to start paying your debts!

Recognize the Spiral

Often, people realize that they are already in unmanageable levels of debt when they are already within the spiral. It might sound difficult and may even look tedious to get out of the spiral but there is a way. Though slow, you can start by listing down all the debts you owe. Include in your list all loans, credit cards, store cards, and other financing vehicles. Anything that you may have used to prevent yourself from shelling out hard cash to purchase something, you must add to the list in order to eliminate the causes of getting stuck in the debt spiral.

After listing them down, categorize them according to the due date or separate the ones that are almost paid off from the ones that aren’t. With an organized list, you will have a better overview of which debts to prioritize.

Save for Emergencies

In many circumstances, you can avoid ending up in debt due to emergencies or unforeseen occasions. Often, people get so caught up in saving up for their bills, shopping, travel, education, that they shrug off the possibility of a health emergency or a catastrophic event. Change the way you save and reconstruct your savings priorities. The soonest you start an emergency fund, the more you can have peace of mind knowing you or your family are safe from being indebted due to unforeseen circumstances.

Don’t Buy the Maximum Allowed on Credit Cards

Unless you have the ability to pay for your credit card in full every month, avoid using one at all. On the other hand, if you can pay for it every single time, the best way to prevent yourself from getting out of a debt spiral is to stop spending it to its maximum. Many find themselves wound up in regrettable situations because they do not feel the money being spent when they use their credit card which leads to overspending.

Construct a Debt Repayment Plan

Once you have reviewed your debts and determined how much you can afford to pay for your debt repayment initiative each month, the next thing you must consider is the method you will employ in paying so. There are two options you can experiment with – debt snowball and a debt avalanche.

• Debt Snowball

Considered the easiest between the two, the debt snowball method involves paying the most you can toward your debt with the lowest balance before paying the standard minimum you have dictated for yourself toward all your other debts. Moreover, this method allows you to pay off at least two or three small debts almost immediately.

• Debt Avalanche

On a more technical and logical side, the debt avalanche method requires paying off the debts with the highest interest rates before anything else. Thus, resulting in most financial savings over time. Unlike debt snowballing, it is natural to take your time to pay off your debts due to large balances with debt avalanching.

Break the cycle of debt and bad money habits!

As you get even more inspired to pay off your debts, you will also find meaning in saving up better for things that matter. This combination paves a renewed path toward financial success, eliminating any probability of sinking back into another debt spiral. Sooner or later, you will get a surplus or excess of the budget for debt repayment all thanks to the budget plan and strategy you made to get out of a debt spiral.

Paying off your debts, saving up for unforeseen circumstances, and avoiding expenses that may lead to another debt, are other ways of paying yourself first for the hard work you put in every single day. Make sure that you do all three tips and you will always feel rewarded at the end of the day.