Things You Should Do When You’re Struggling To Pay Down Debt

By: Yin Yan Teo

There are almost a limitless amount of ways for you to borrow money, but paying it back can be the most painful process you ever face. From dealing with Singapore’s high cost of day-to-day living to trying to navigate the financial woes of your job, career or business, you’ve already got enough to worry about!

So what happens when you’ve got enough debt every month to make you worry, but your salary isn’t enough to make you feel like you can handle it? Regardless of whether you took a car loan, student loan or home loans, these loan repayments can really add up. Additionally, if you add a high interest credit card debt to the list, you’ve got a recipe for disaster.

While it definitely isn’t going to be easy, we at Double Ace Associates are here to offer you a few tips to make debt repayment a more smooth sailing process.

Reduce Your Cost of Living

If your debt repayments are getting too overwhelming, it means your living expenses are too high, or your salary is too low to aid your process in debt repayment.

Cutting your cost of living is easier than finding a new job. As such, when struggling to pay down debt, cutting your cost of living should be the first thing you do.

Instead of just telling yourself to spend less, it is essential for you to take concrete steps to cut your monthly costs. This can include cancelling unwanted or unnecessary subscriptions, memberships, downgrading your mobile data plan, or even selling your car if the debt is already piling up to be too much.

After taking the first step to cut down on your living expenses, the next essential step would be to create a realistic budget for all the things you spend on. This can include creating a tighter budget for shopping, meals, groceries and transportation.

By tracking your spending over a few months, you will be able to get a clear picture on how much you usually spend. This will aid you in figuring out how much you can actually afford to spend, or which areas you can cut down on in order to make debt repayment a much faster process.

To make budgeting easier, you must be prepared to make daily lifestyle adjustments. This could include learning to cook instead of eating out daily, or opting for cheaper meals. You can even use a budgeting app to help yourself keep track of how much you’re spending throughout the month so you can tell whenever you’re about to over exceed your budget.

Look For a Side Income

If your salary is too low and your job is underpaying you, you should definitely look for new job opportunities in order to get paid what you’re worth.

However, as it is hard to find a new job immediately, it is a good idea to look for a side income, especially if you have high interest debt. This can include credit card debts or personal loans that need to be paid off quickly.

If you have high interest debt that needs to be paid off urgently, some quick ways to earn a side income would be to get a part-time job on the weekends. You can either work at events, tutor a few kids or even sell your unwanted belongings on Carousell.

In a less urgent situation, you can look to slowly raising your income by doing freelance work or starting a small side business.

Don’t Neglect Your Emergency Fun

While paying off your debt would be the most urgent thing to do on your To-Do list, we advise you not to neglect the importance of maintaining an emergency fund. If you are an employee with a stable job and income, your emergency fund should be equivalent to at least three months’ worth of your typical expenses. Those with a less stable income should aim to have an emergency fund of at least six months’ worth of expenses.

Now, you must be thinking, why keep that cash on hand when you can use it to pay off debt? Assuming you need a few months or even years to pay off your debt, not having an emergency fund during that time would mean that if you ran into an emergency such as an unexpected job loss or illness, you would be in the red. This could lead to you getting into more credit card debt or taking out more personal loans to stay afloat.

Stay Away From High Interest Debt

When you’re already struggling to pay off your existing debt, the last thing you want to do is to get into more debt.

Specifically, you should always stay away from high interest debt such as credit card debt. Not being able to pay off these kinds of debt can quickly cause the debt to increase in amount at an alarming pace. This types of debt can easily spiral out of control and can even lead to bankruptcy.

If you’re already having problems with your cash flow, the risk of not being able to pay your credit card bills in full at the end of the month is particularly high. As such, it is highly important for you to avoid borrowing any more money that you don’t have the ability to pay back as that would add to your already heavy financial burden.