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Crawl Your Way Out of Crippling Debt & Achieve Financial Freedom

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Around 8 in 10 Americans have some form of debt. But while owing money is common, it does not have to be a normal part of life! After all, a high debt-to-income ratio can represent a major obstacle to getting a mortgage, scare off lenders, and prevent you from building up your retirement fund. 

What’s more, recent studies have shown that 73% of Americans are worried about money and 46% of those with overwhelming debt also suffer from depression or anxiety. 

Luckily, you don’t have to succumb to your own debt. Here are 6 strategies to manage debt and regain financial freedom. 

Take a Hard Look at Your Finances

The first step to better managing your finances is to face the music and take stock of what your financial situation actually is. Start by organizing all of your bills, tracing your lenders, and visualizing the volume of debt you are facing. 

This strategy will offer you a comprehensive snapshot of your finances and can help you take a more proactive approach to your finances. Understanding the extent of your problem and crafting a plan to start repaying your debt can help also feel more in control and ready to face setbacks. 

Pro tip – if you have been trying to hide your financial situation, you are not alone. 2022 surveys show that around 66% of those with financial struggles feel embarrassed by them. If you have found yourself dealing with feelings of overwhelm and discomfort, consider working with a financial advisor. 

Consider Refinancing Your Mortgage

Buying a real estate property is, for many, the investment of a lifetime. That is why making the right financial decisions on your home can help you protect your money and financial stability. 

Working with a financial advisor is crucial to understand what the value of your home is, how much equity you own in it and whether your monthly repayments are right for you. If your financial situation has changed since you have taken out your mortgage, or the economy is now in a low interest rate environment, you should consider refinancing your mortgage. 

Learn How To Make Your Credit Cards Work for You – Not Against You

While credit card debt has been declining over the past year, in 2021, US consumers had an average balance of $5,221 on their credit cards. While debit cards can be a powerful tool to access funds, earn rewards, and keep up with monthly expenses, it’s important to remain in control of your balance and spending. 

Some golden rules to keep in mind to use your credit card wisely and start climbing out of debt include:

  • Focus on repaying the cards with the highest interest rate
  • Pay more than the minimum payment each month
  • Keep a low credit utilization – ideally around 30% of your credit limit
  • Avoid late payment fees by setting reminders
  • Try to pay your balance in full each month
  • Understand how your cards’ reward systems work

Tackle Your Student Loan Debt

Student loans help millions of people attend college and access higher education. However, in 2021, US consumers had an average outstanding student debt of $39,487 – a sum that can easily impact your financial stability!

If just chipping away at it isn’t working, you can consider working with services like SoFi to refinance your student loan and access better interest rates. Other options to repay your student loan faster include asking your employer for student loan assistance, making biweekly repayments, enrolling in autopay, or making larger repayments each month. 

Start Rebuilding Your Credit Score

Your credit score might seem nothing more than a simple 3-digit number. But this figure represents a snapshot of your entire financial situation and can determine what kind of mortgage deals and financial products you’ll be able to access. 

Keep track of your current credit score and start rebuilding it by paying your bills on time each month, repaying debt, and checking your credit card reports for errors.

Adjust Your Budget and Start Living Below Your Means

Adjusting your household’s monthly budget and reducing your expenses is a significant part of regaining financial freedom. Using strategies such as the 50/30/20 budgeting rule can help you build your savings each month while paying down your debt. 

Alternatively, you could consider downsizing and reducing significant overhead costs like rent and bills. Lastly, commit to dedicating any monetary windfall to paying down debt – it might seem hard at first, but it can be extremely rewarding in the long term!

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