The average household is dealing with household debt and are struggling with how to tackle it through action plans. This is just making the situation worse as debt compounds and puts an individual or family further into debt. With this fact, it is extremely prudent to take this seriously and coming up with the action plan as soon as possible. Everyone will agree that once the action plan has been set then the time to get out of debt will be reduced; the earlier the better. With a family, spouses are able to help each other out to accelerate the debt reduction to pay off the debt within a certain number years. It is wise to help each other out as doing this individually can take longer given the current financial situation and income brought in.
Below are 5 ways to get out of debt for retirement and to reduce the stress within the financial household.
1. Living frugally and below your means
If you have heard the term living the cheapskate way, this is what we are referring to when we mention living frugally and below your means. When it comes to living with debt and having a limited amount of income, it is crucial to watch your spending habits. If there are things that you can do on your own at the home instead of hiring someone then take advantage of your talents. The more money that is saved will help in further accelerating the debt payment to not worry when it comes time for retirement.
Turn your hobbies into a revenue stream.
Any unneeded items at home can be turned in cash to add to the income stream.
If you own a big home, later in life you will not need the extra space; plus the costs associated with maintaining the home and taxes. You may want to consider downsizing to a smaller home to save on the expenses and even gain equity from the sale of bigger home. This is another way of adding income to the household.
Consider reducing the outings to restaurants, cinemas; commute rather than driving and shop thriftily. If you live near amenities, and if possible, then could you walk instead of driving? Not only will it save money but it will give you some exercise and to be more healthy in life. Other options would be to carpool with family or neighbours.
2. Consolidate debt through low interest balance transfers
There are different methods when it comes to debt consolidation and when it comes to looking at your current debts, where they are located and the interest being paid, you can find the best method to determine your own consolidation plans.
The one type of debt consolidation that is effective is to shop around your credit card provider and inquire if they offer a balance transfer promotion at a low interest rate. Even though this is limited, it is an effective strategy in reducing the amount that you pay overall through fragmented debt owed from different credit cards. The other advantage is that instead of thinking which credit card has been payed, you would just focus on one or two places.
From my experience, I have noticed that credit card companies are offering balance transfers at a reasonable rate such as 1.99%, 2.99% or 3.99% for 6 to 12 months and then I would shuffle the debt amount in order for the minimum payment to go down but still pay the amount I do every month; thus bringing the debt down significantly. Once one promotion is nearing its end, I would look at other cards and if they are offering a similar or less interest rate promotion, I would transfer the balance. It is very convenient and practical.
As it is common that an individual has credit cards, the first thing that should be considered before thinking about getting another loan or consolidate debt from an institution is to take advantage of credit card low interest balance transfers.
3. Host a student through a student exchange program or rent out extra space to students
If you own a home and have an extra room that is taking space, would it not be of good use to gain income by hosting an international student or even rent out that room to a student studying in your local college or university? The purpose of the income would be another way to bring debt and once the debt be payed off then put it towards the mortgage to pay off faster. There are so many student exchange programs that are looking for families to host an international student for a period of time.
There are also students that are new to your city which as universities that are looking for alternatives to the campus residence in order to save. Many students have little to no income stream and the least thing they want is to pay for residence that will put them into big debt.
As we are becoming a shared society, it would be a win-win situation for the student and the home owner to alleviate each other’s financial situation.
4. Shop at discount stores and utilize coupons
We need clothing, feed our family and ourselves and sometimes shop for items that we have use for whether at home, work or leisurely.
Stores come in different flavors and they would range from luxury to discount. Not everyone can afford or need luxury items; the majority would agree that income is limited as compared to our choices. These can be with brick and mortar or online stores. What is becoming common is that the social trend is leaning either to buying in bulk or through discount chain stores. Both save the individual when it comes to spending where buying in bulk lasts longer and going to discount chain stores costs less.
The other tool that is used and is very powerful is the use of coupons. Taking 50 cents, 75 cents or one dollar off of an item makes a big difference; especially when at the cash out and putting them towards multiple products. Depending on the usage of coupons, one can save $20 up to $100 in a given week or month. This is a big deal as that saving can go towards putting towards debt and if debt-free in retirement then as extra income.
Never ignore coupons whether available at store bulletin boards, coming in by the mail or online. What is even intuitive is that when shopping online, certain stores will give you code to put towards a purchase on checkout for 20% off of the item or shipping or when buying at a minimum such as $25 or more. Take advantage of special events such as seasonal liquidation or holiday offers. Note that to compound things further, discount stores do accept coupons making even more savings.
5. Reduce costs of current services
There is section on this website that talks about reducing or cutting services that are either not needed or that can be scaled back under the savings section. Look at your current services and see what can be reduced as we are living in a competitive capitalist society. You will be surprised that some companies will offer services with more features and at the same price that you are paying for or even less. This goes with cell phone providers, tv services, home and auto insurance.
The other way to think of reducing services is if it is redundant. Are you paying for data plans when the majority of the time you are near WiFi hotspots? Are you watching not watching a lot of television and mostly viewing streaming content? Are there certain services that are included in an insurance where you already have that with another service such a roadside assistance, car rental, travel insurance? If you say yes to the questions then time to think of cutting the redundant items. Save your money and put it towards debt or extra income.
In the end, you want to focus on finding ways where you can bring in more income to the household to get rid of any outstanding debt and then live financially well when it comes to retirement. Educating yourself in bringing in more cash flow to your income will make it much easier in the acceleration of significantly reducing the debt as you approach retirement. Live within your means and you will do well.