How Long Does “Free-from-debt” Freedom Last?by Ben Stokes Freelance Blogger
Have you ever been stuck in debt? Are you still struggling to get out of the debt trap? Many people take on debt without realizing their affordability and, in the end, fall into a debt trap. If you ever had made the mistake of taking on debt more than your repaying capacity, you had realized that it could be extremely hard to get out of it.
Multiple emails, texts, and letters start threatening, and you continue to lose your score, making it more complicated to secure a loan down the road. A debt management company had helped you, or your lender had agreed upon a flexible repayment schedule that you offered to them.
Well, once you are free from debt, it gives a sigh of relief. It seems as if a big burden has eased off. You begin to breathe, or you feel that your budget gets some room to breathe properly. Once you are free from debt, the next question that is often asked is how long this situation lasts.
Even though you were up to your neck in debt, you do not stop relying on loans for most of your needs. Many people do not learn from their mistakes in the past and borrow money as soon as they get out of debt. If you are one of them, wait – because you can fall into debt once again. Here is what you should do.
Let your finances breathe
Once you have settled all of your outstanding debt, you should carefully analyze how much you have and make all of your expenses from the available money. No matter what you want and need, you should try every possible effort to make do with what is available.
A rule of thumb says that you should create a budget. Note down all of your income sources and then expenses. Make a comparison between them to see if you can easily meet all of them. If you find that expenses are more than your income, you should try to find out how you can minimize them.
Just because your expenses are more than your income, it does not mean that you will start borrowing money. It is crucial to understand that if you cannot meet your regular expenses from your current income, how you will be able to pay off the debt that includes interest payments too.
You should classify your expenses between essential and nonessential. Try to avoid discretionary expenses. For a couple of months, you should live off a lean budget.
Increase income sources
Your first priority should be cutting back on your expenses. However, if you find that you cannot meet all of your expenses despite a lean budget, you should generate more income sources. You should either switch to a new job that pays you higher remuneration, or you should choose freelance or part-time work.
This can obviously be difficult to handle freelancing and your full-time job, but this becomes important when you are in a tight corner. If you do not want to get into debt once again, you will have to do so.
However, there are some other ways to make money too. For instance, you can invest your money. Even though you invest a small amount of money, you can make significant growth. If you do not have knowledge about the investment world, you should take help from an investment expert. They can help you make a decision based on your needs and risk-taking capacity.
Do not make a big purchase
After free from debt, you should spend at least a year without making a big purchase. For instance, some people plan to buy a car or a house. Such big purchases need financing and you must have enough money to keep up with repayments.
For instance, if you plan to buy a car, you can consider car finance in Ireland with no deposit, but this can make it hard to fund all of your expenses. Remember that car is a big purchase, and you will tie up with this loan deal for at least three years.
Instead, you should postpone the purchase and set aside money for the car’s down payment in the interim. This will increase your down payment size, and the larger it is, the lower the car loan will be.
If you have finally settled all your outstanding debt, you should not take out a new loan for some time. A rule of thumb says that you should at least avoid it for a year. It would be best if you utilize this time to control your finances.Introspect what were your mistakes and find out how you can avoid them committing in the future. Try to avoid making big purchases and set aside money for a rainy day not to have to chase lenders to borrow money.
Created on Mar 5th 2021 06:52. Viewed 122 times.