Are You Stuck in a Cycle of Debt?

For many families, living paycheck-to-paycheck seems to be the only solution. However, this encourages a cycle of debt, a situation where you seem to get back in debt as soon as you work your way out. Every time this occurs, you try to work your way out again, only to become so frustrated because you need to use credit to make an emergency purchase or because cash is too tight.

Why Does This Happen – Ask the Hard Questions

Before you can make a move towards improving this situation, you’ll need to address what’s causing it. It’s not easy to answer these questions, but be honest with yourself.

• Do you buy things you really do not need but just want to have?
• Do you fear using your available cash, so you turn to credit to make purchases?
• Do you tend to make emotional purchases because of stress?
• Do you just need more income or available funds to meet your goals?
• Do you lack a way of managing emergency financial situations?

If you’re in these situations, it’s time to get some help. Here are a few ways you can get out of the cycle of debt.

Create a Cash-Based Budget

Credit is a good thing when used wisely. However, your day-to-day expenses shouldn’t be based on your credit access. Instead, create a budget for your utilities, housing payments, and other routine expenses using a cash-based budget.

Work to Pay Down Your Debt

You need to pay off your debt to get out of this cycle. This may mean increasing your income for a short period through extra hours or perhaps a side job. Work on reducing other costs you have too, such as cutting down on eating out, to help you pay off your debt faster.

Consider Consolidation

In some situations, the best first step is to consolidate all of your debt into one new loan. This allows you to pay off your debt faster within your budget. It can also help you rebuild your credit over time if you make routine, one-time payments.

In the last decade, personal loans have become much more common—for small projects, big purchases, and for debt consolidation.

Pros:

• Fixed interest rate and monthly payment
• Fixed payment period
• Access to additional cash to pay down debt

Cut Up your Credit Cards

If you are the kind of person that can’t resist a good deal and doesn’t pay your credit card off in full each month it is time to cut those cards up! If you have debt across multiple credit cards, consider the snowball and avalanche payoff methods.

Snowball. Make minimum payments on your larger debits, and pay off your smallest balance first. Once you pay off that account, tackle the second-smallest debt, and so on.

Avalanche. Pay off the credit card with the highest interest rate first. Then, address the debt with the next-highest interest rate, until you’ve paid off each card.

Read more about Snowball and Avalanche tactics here

Don’t Shop Without a List

Going to a store unprepared is going to cost you way more if you had a list of everything you needed. Make a goal of only going to the shops when you need to and go with a list of what you need to buy and from where that you have built up over a week or more. Don’t walk down the make-up aisle if that is not on your list.

You don’t have to stop using credit. Rather, you need to work to establish a plan for using it responsibly. Your lender can often help you to get back on track. Apply with Elevations Loans to get back on your feet to remove you from the cycle of debt. Join the thousands that have gone through the similar situation.