How to eliminate debt

How to eliminate debt

Being in debt with no possibility of payment and observing how liabilities grow more and more every day is one of the most distressing sensations that can be experienced in financial life. Knowing that we have a commitment that we are not fulfilling and that every day becomes more insurmountable tends to generate a feeling of growing discomfort.

There are people who ignore the problem and abandon it because of the despair of feeling that there is no solution. However, putting the problem aside only tends to make things worse, because it creates a negative credit history that can affect you in the future.

What to do to eliminate debt?

Two simple strategies to reduce your debts:

  • Know your debts.
    It may happen that we know what we owe, but we do not know exactly how much or to whom. A very important step is to take note of all the debts we have and organize them according to the amounts and payment terms we have.

    The main criterion to categorize a debt as main or more urgent is not the amount but the payment term. For example, it may be that the mortgage on our home is quite high, but it will not be as urgent as the payment of the credit card, whose term expires at the end of the month.
  • Set aside a monthly amount.
    It is highly recommended to allocate an additional monthly amount to pay money to the debt. It must be a significant amount that really allows the gradual reduction of liabilities. In order to carry out this step, it will be necessary to first consider and list all the expenses we make, in order to know which ones are expendable, so that we can obtain money from there. 

If these steps are not enough to gradually and significantly reduce the debt, it means that the problem is more complex. In these cases, it is best to approach the financial institution with which you have the debt, to explain the situation and review possible alternatives, such as refinancing. The most important thing is not to ignore the situation and look for management options that work for each individual situation.

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