5 steps to get out of the red right now

Do you know how to get out of the red? Let he who has never faced debt cast the first stone.

The dangers of debt

I don't even need to say that, among the most obvious dangers of a life with debt, the main one is the constant risk of these debts growing more and more and becoming a big snowball, right?

It is important to remember that all and any type of debt carries the dreaded interest.

And often the debt itself isn't even that high.

What makes it difficult to pay off this debt in full is the presence of interest on the transaction, whether it's an overdue loan, a credit card debt that got out of control, or that financing that compromised your salary.

Furthermore, another danger of debt is the famous “bad credit”.

If you have debts listed on your CPF, your name may end up with the institutions responsible for handling these debts – the famous SPC and Serasa.

The main causes of debt among Brazilians

credit card

This is, perhaps, the main cause of debt for the average Brazilian.

This debt, in most cases, starts thanks to excessive use of the card, resulting in a bill that exceeds the value of your monthly income.

Because of this, many of these users make a classic mistake: failure to pay the full amount of the invoice, causing the customer to fall into revolving creditthe.

This is the great villain and cause of debt.

Thanks to extremely high interest rates, the initial debt amount can double – and even triple – making it even more difficult to pay off the debt.

Personal credit

Another item that contributes significantly to Brazilians' debt is the use of personal credit.

This happens because, in general, access to personal credit is easier than other types of loans offered on the market.

Because there are not many restrictions when applying, it ends up being an option for many Brazilians.

What happens is that, when taking out this loan – whether to deal with a financial emergency or even to carry out a project – the customer often doesn't realize the consequences that this type of credit can bring.

Due to high interest rates, customers often end up struggling to manage their installment payments on time, resulting in delays and, consequently, their name being reported to the SPC or Serasa.

Vehicle financing

In addition to the much-dreamed-of home, another dream that, if not planned properly, can become a nightmare is the dream of owning a car.

When looking to purchase a vehicle, many Brazilians end up opting to take out financing.

However, when making the payment, the installment amounts are often higher than the consumer's monthly income, compromising their budget.

Furthermore, the emergence of unforeseen financial events can result in late payment of installments, resulting in the dreaded debt.

5 steps to get out of debt

To make dealing with debt easier, we've put together some essential steps for anyone who wants to take the first step and start changing their financial reality right now.

1- Write down your expenses

I know, I know…this may seem like a really silly tip, but trust me: it makes all the difference!

The habit of writing down your expenses will give you more autonomy in how you manage your money.

This way, you will have greater control over your credits – the money coming in – and your debts – your expenses.

And to put this tip into practice, anything goes: do you have a greater affinity with technology?

You can opt for a more detailed spreadsheet. But if you're more of a pen and paper person, set aside a notebook to keep track of these notes.

With this control, your financial life has everything you need to start getting back on track.

2- Set a goal and establish priorities

By setting a goal, you'll be able to prioritize your debt-getting out of debt plan.

Additionally, by prioritizing, you'll put the most important and essential bills first.

This way, you will be able to better visualize which expenses are really necessary and which can be dispensed with in the short term.

3- It's time to contain expenses

Getting out of debt is crucial. Therefore, this project requires a lot of commitment to make it a success. And that's where spending cuts come in.

This third stage, which is the result of applying the two previous tips, is now where you will have to give up some things in your life so that you can achieve your main goal: get out of the red.

This doesn't mean you'll need to cut out all leisure activities from your life, but you will have to cut out some of the more superfluous expenses from your routine – like that bar you go to every weekend or that streaming service you barely use – so your financial life can get back in order.

4- Get rid of credit cards

This, despite being the most painful step for some people, is one of the most necessary – especially for those who use their credit cards without control.

By getting rid of your cards, you'll be doing your wallet a huge favor.

Without these cards, you don't run the risk of giving in to temptation and making those all-too-common impulse purchases, resulting in more debt.

Ideally, you should only keep one credit card for emergencies, and only use it in cases where there is an extreme need.

5- Seek to renegotiate your debts

And last but not least: look for the responsible institutions and renegotiate your debts.

When it comes to older debts, many companies offer installment plans and even discounts to help customers pay off their debt.

To do this, contact these companies, explain your situation, and learn more about the payment options they can offer.

Conclusion

Dealing with debt can seem like a daunting task, right?

But as you've seen throughout the text, by taking a few simple steps, you can – even if only little by little – regain control of your finances.

This way, you will be able to manage your finances in a healthier and debt-free way.

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Financial Education

Nathalia P. Silva

October 26, 2021