Cash advances are helpful when emergencies arise, especially for those with poor credit ratings, however making them part of your monthly routine can have a crippling effect on your finances. Paying off your debt will not only help you avoid extra trips to the cash advance store, it will help you improve your credit, which could lead to you being eligible for low-interest loans when the need arises.
Before you can address your debt, you need to make a monthly budget. Write down all your net monthly income. If you are paid weekly or every two weeks, multiply your weekly net income by 4 1/3 to get an average net monthly income. If you are paid by tips or commission or anything else that varies from month-to-month, then determine how much you made over the last 12 months. Average that out per month by dividing the total by 12.
Next, write down all of your monthly expenses. For anything that is variable (utilities, groceries, gasoline, etc.), average it out per month for the last 12 months. Any expenses that are regular but are not paid each month (car maintenance, insurance payments, etc.), you want to average them out per month as well. Include such things as how much you spend on average each month when eating out and on clothes and shoes.
If your income is greater than your expenses, then you’re ready to start paying off your debt. If your expenses are greater than your income, then you have some work to do first. To avoid having to look into more cash advances, you have two basic choices: reduce your expenses or increase your income. Either way, you will need to be prepared to make sacrifices, otherwise you’ll find yourself following further behind when you are forced to take out more cash advances.
It is often quicker to reduce your expenses. Cut out anything that is unnecessary, such as eating out or purchaser clothes with designer labels. Get up five minutes earlier in the morning so you can make your own coffee instead of stopping at a coffee shop on the way to work. Stop paying for minutes on your cell phone that you don’t use or even switch to a service that is pay-as-you-go instead of monthly. Buy generic groceries instead of name brands. Carpool to work. Be creative as you can, such as selling your SUV, which could save you on car payments, gasoline, maintenance and insurance.
If you can’t reduce your expenses enough to be less than your income, you may need to get a second job or a business you can do in your spare time.
Once you have extra income each month, then you use that to pay off your debt. First, determine what you owe on each debt and what rate of interest you are paying. Then, choose one debt and apply your extra income each month to that debt until it is paid off. After that, take all the extra income, including what you were paying to the first debt, and pay off a second debt. Continue doing this until all your debts are paid off.
You can choose which debt to pay off first in a couple different ways. The fastest way to pay off debts is by paying off the ones with the highest interest rates. However, many people choose to pay off the smallest debts first. This helps people who have trouble sticking to a budget because they can see the tangible result of paying off a loan sooner, which is a psychological boost. You also can choose to pay off a debt that has a high interest on a low amount.
In the end, the important thing is to consistently pay down the debt without incurring more debt. If an emergency occurs, you can apply that extra income toward the unexpected expense. And, of course, if the need arises, a cash advance can help bail you out if the need is greater than the extra income.