Know your debt and 5 ways to get out of it
Debt. There are many debates around how good or bad debt is. There is one school of thought that stands by the fact that “no debt is good debt” and another that believes “ it takes money to make money”. A lot can be said on both sides but we’ll give a brief explanation of what good and bad debt are, then head on to what really brought you here: How to get rid of debt altogether.
Good vs Bad Debt
There might in fact be good debt. As suspicious as that sounds, hear us out. Any calculated debt you take to improve your life or increase your net worth can be considered good. How? Say a Student loan: the more educated you are, the higher your chances of good employment and higher earning potential, hence a good debt. Another good debt would be investing in your business which would ultimately increase your net worth.
But what about bad debt?
Well financially, bad debt is characterised by borrowing money on an item or activity that will not add value or is depreciating in value. For example, borrowing to buy a car can be considered a bad debt since a car depreciates in value from the moment you start driving it.
But the million-dollar question is how do you get rid of debt?
Five debt ridding techniques:
1. Do more than just the minimum
With every debt there usually is a minimum amount you are required to pay every predetermined period of time. While missing these payments can lead to dire consequences or an increase in debt, here is a wild idea: why not pay more than the required minimum? Paying more than the required minimum amount will allow you to clear your debt not just faster but at a lower interest rate.
2. Get your Side Hustle on
With the dawn of a digital era, the world is now a global village. You can learn new skills for free online but even more important is that you can use your skills to make you extra money on the side. With online freelancing sites like Fiverr and Upwork, you can get gigs from anywhere in the world. But side hustles are not limited to the online spaces, even right there in your neighbourhood you can solve a problem and make money from the solution. Even better, you can get paid straight to your phone with the m-GURUSH mobile money platform. Download the app today.
3. Debt snowball method
A popular debt management solution is the Snowball method. In this method, you list all your debts from the smallest to the largest. You then direct all your excess money to the smallest debt while paying the minimum amount for all the rest. Once you’ve paid the smaller debt you focus that extra money on the next smallest debt until you’ve paid all your debts.
With this method you register small wins faster as you pay the smaller amounts first, giving you motivation and momentum to finish paying the rest of your debts.
4. Set up a barebones budget
Have you heard of the bare-bones budget. It’s in the name. With this budget, you strip down to only the essentials like food, rent and transport. Sounds brutal right?
A bare-bones budget is only used over a short period of time and may be hard to sustain in the long run. However, this strategy ensures you have even more funds to throw at your loans, clearing them much faster than you normally would.
5. Declutter and let go.
Our final tip would be to do some decluttering. Remember that lamp you bought 7 years ago and haven’t used in 5 years? Or that old sofa you have that doesn’t match with the new set you bought last year? It may be time to get rid of it and not throw it but sell it!
What’s more, is that you can sell it and receive money straight to your phone with m-GURUSH. To start enjoying affordable, fast and convenient transactions by registering today. Text “HI” to Gurushie at +211 912 188 811 and follow the prompts to register today.
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