Why Am I Always Broke and How can I Become Debt-free

Have you ever wondered why you are always unable to get out of debt? Have you been struggling to maintain your finances at a manageable level but consistently failing? According to the Federal Reserve Bank of New York, the total debt balance is the highest it’s been in almost 20 years.

Luckily, you can still be able to pry yourself away from debt and manage your finances better. You can do a number of things to avoid being broke all the time and also get to pay off all debts that you have.

Following are some of the things that you can do to determine your current financial scenario and the things that can be changed or improved to manage your money better. You will also learn how to deal with the debt you currently have and avoid obtaining more debt when you are debt-free.

Identify Your Current Financial Scenario

You will not be able to get out of debt without acknowledging that you are actually in debt. When you identify the main debts that you owe in life, you will be already started on the way to recovery. Assessing your current financial state will enable you to have a better grasp of things.

A simple spreadsheet can prove to be effective at determining what debts you owe and their corresponding amounts. List each amount together with its repayment term and interest. As such, you will have a better picture of the kind of debt you are in.

Make a Budget

The second step to bringing your debt back under control is making a budget. Budgeting all your money is an ideal way to make a budget that can help manage your debt. Here are 13 budgeting apps That we recommend

It involves making changes and adjustments to your spending to have a lot more extra money saved up at the end of the month. For instance, you can start by using the previous month’s income to live instead of your expected income.

Reduce any wastage that you observe while making your budget and make better decisions about how you spend. This will enable you to get your finances under control and enable you to have more money than you can contribute to your debt.

The main idea behind a zero-sum budget is to allocate all your money to debts, savings, and paying your bills. This way, you do not have anything left over, which means that you will get back in control much faster.

Entertainment and transport are some places where you can cut down on spending instead of your investments.

Cut Down on your Biggest Expenses

It is very difficult to get out of debt if they keep on growing. Since you cannot take money out of your savings, the money will have to come from other sources.

Inspect your current budget carefully and determine where you tend to spend a lot of money. For instance, are there unnecessary travel expenses that have been eating into your finances?

Are the other changes that can be made to enable you to stop spending more money than is necessary? Your expenditure can be reduced by using approaches such as using coupons for your purchases and bulk buying to reduce spending.

You can also sell your car to help settle your debts and reduce the amount you will need to spend on it each year. Try cooking from the comfort of your home since this will reduce your need to eat out hence enabling you to save more. Some subscriptions can be trimmed from your budget to enable you to handle your debts more easily.

Put More Effort Towards Settling Debt

Minimum payments are barely enough to take care of your debt problem. If you want to get out of debt, you can start by increasing the amount that you pay for them. Paying higher amounts will enable you to reduce your overall debt, and the period you will be in debt.

Tackle One Debt at a Time

When you take on a single debt at an instance, you will handle your debt problem more easily. For instance, if you have four debts of varying amounts, you can start on the smallest debt and finish it off as quickly as possible. this is called using the Debt Snowball method. 

Having done this, you can then start with the other debts and tackle them the same way you did for the first one. This way, you will be able to tackle your debt more efficiently, and once you have ticked off one payment, you will be assured that you will not go back to it.

Staying debt-free means closing the doors on all the debts you currently have by paying them off. As such, you won’t need to worry about taking on other debts, which will leave you in more worries than you can handle.

Switch to Cash

Your method of payment plays a role in the amount of debt that you have. When you switch to cash, you will save more, and debt will be harder to fall into.

The use of cash means that you will tread around debt more carefully, and unnecessary use of your credit card will be reduced. This means that you will be more responsible financially, and managing your money will also be a lot easier.

Use cash for most of the payments you make, and you will even start to notice areas where you can save money. When you change to cash, you will start to observe spending that can be reduced and others that can be eliminated to ensure that you are left with more money to pay your debt.

Find Additional Sources of Income

Additional ways of earning a living are usually the easiest ways to avoid going broke. Additional hours put into your regular work can mean getting paid for overtime.

This is very useful as a source of income, and it can help you better manage your debts. If you feel like your debts have been piling up and are overwhelming you, getting additional sources of income will enable you to pay them off more easily.

You will also have additional money to save at the end of the month, which will prevent you from staying broke. Additional income is also useful when you need to pay off your debts in the least amount of time possible.

When you have completely paid off your debt, the additional sources of income can be channeled into your savings for better financial independence and control later on. That side hustle might seem uninteresting, but it can help you get over your debt condition and gain some financial leverage.

Identify Debt Traps and Pitfalls

Knowing the debts that you should avoid at all costs is important when you need to become debt-free. Debt traps are all around, and knowing them can be incredibly important. Not only do they enable you to avoid the debt in the first place, but it is also an important way of staying away from additional debt.

Debt pitfalls are also common and come in attractive packages. Learning to say no to these debts is important and will place you in more control over your finances. You will always be in charge, and you will learn to avoid placing yourself in greater debt. After paying the debts that you currently owe, you will manage to avoid more debt.

Debt consolidation is an approach that should be greatly avoided since it tends to have severe consequences. Avoid them at all costs whenever you are approached by someone ready to roll all your debts into a single debt.

Managing debt is all about addressing the main reason for the debt and sealing off all vulnerabilities that might be making you prone to falling into debt.

Save More

When you have a mentality of saving, you will see how your finances are being channeled. You will also identify better ways of paying off your debt.

Saving also helps you avoid being broke and can have profound benefits for someone intent on their financial future. Saving more will ensure that you always have some additional money which can prove useful for you.

A sustainable financial approach to saving will ensure that you are always able to save a bit each time which, in the long run, means being able to do more with your money.

Conclusion

Being in debt is not attractive to anyone. When you stay in debt for a long time, you get the condescending feeling that you will never be able to get out of it.

However, there are things that you can do about your current debt and always being broke. When you follow the tips and tricks that have been outlined in this post, you will be in control of your finances.

Not only will you be able to pay off all your debts, but identify loopholes that have been causing you to get into the debt in the first place. You will also be able to free up your financial potential to enable you to save more and become better organized. Clear off your debt and realize the great benefits of not always being broke.