Debt – that annoying burden that lurks at the back of your mind and haunts you when you are considering whether to indulge or save. Ignore it or try to subdue it half-heartedly and it would snow-ball into a larger monster that would be even more difficult to overcome.
We understand that leading a debt-free life is easier said than done. This is especially so for single parents who face more hurdles in overcoming their financial struggles. For example, they must provide for the family on a single pay cheque and often do not get to benefit from family package discounts.
Whether you are a recent graduate or a single mother, debt does not discriminate. However, fear not! Today we have a cheat sheet to accelerate your journey to becoming debt-free:
1. Always Plan!
Although this may come intuitively for most us, sometimes we need reminders to review our budget. Everyone tells you to eliminate unnecessary things from your budget through planning. We all know that when we are in “budget” mode, that you should eliminate most of your “wants” and only keep your “needs”. Throughout the course of life, many “debatable” items may creep into your budget, hence foiling your debt management plans. Thus, we should be disciplined in checking that our budget is truly only inclusive of things that are necessary.
One of the easiest ways to start is with a personal budget template from excel. First, a simple guide to start planning your budget would be identifying your net income, after subtracting your social security, taxes and other consistent allocations. Next, categorize all your bills into fixed and variable costs to understand where you need to cut back your expenses. There are many spending tracker apps that can make the process much more convenient, like YNAB.
Finally, the hard part! Looking for areas you can adjust your spending. Do you really have to go out for a fancy meal every week or could you opt for buying quality ingredients to cook at home? Is there anything that you could substitute for a more cost-effective solution? It may seem like small, petty savings at first, but it all adds up!
Lastly, make your money work for you by investing in financial products/stocks that make more than your measly interest in the bank. But do get a professional broker and do your thorough research before investing your hard-earned money. No one wants to incur more debt, while trying to pay back their current debt!
2. Be familiar with benefits owed to you
Childcare can be expensive. But did you know you can claim tax-free childcare, where an extra 20% is put towards care?
Are you working at least 16 hours a week? Have you paid for approved care? You might just be eligible for Working Tax Credit and you could be covered for up to 70% of your childcare costs.
For those who are under low income, you may be able to benefit from financial help through the Council Tax Benefit. There is even a housing benefit for those who are unemployed, on a low income or claiming benefits. Those who are eligible for making a new claim for Housing Benefit are those who are receiving the severe disability premium or are entitled to it.
For those who need help with living costs, Universal Credit would now replace Child Tax Credit, Housing Benefit, Income Support. income-based Jobseeker’s Allowance (JSA), income-related Employment and Support Allowance (ESA) and Working Tax Credit. So do read up to reap all your government benefits!
3. Stay Motivated
Use Canva or ready-made Quotes to remember “why” you are on this journey. Why do you want to clear your debt so badly? Whether is it is to afford that dream holiday or to provide better education for your kids, print it out and look at it every day.
Another way is to use powerful visuals to stay on track. Create a pie chart to track your progress in reducing your debt. As you pay off your debt and see that portion of debt slowing decreasing into a thin slice, you would be encouraged to keep pushing on. Lastly, use a debt meter to measure your progress. Once the debt bar reaches 0, it’s time to reward yourself!
4. Dive into some expert advice
To end off, you can try out Dave Ramsey’s 7 steps to financial freedom!
- Save $1,000 for an emergency fund
- Pay off all non-mortgage tax using the Debt Snowball
- Save 3 to 6 months living expenses and put it in your Emergency Fund
- Put 15% of your income into retirement savings
- Save for your children’s college fund
- Pay off the house early
- Build Wealth and give
To sum up, be disciplined in keeping to your spending and saving habits. Just a little change could go a long way!