Before the pandemic, people really thought that things would go smooth sailing even without savings, having a little debt, and a constantly paying job. The sense of security was there until things got out of hand. The pandemic affected everyone, and family finances were shaken by the loss of jobs and, for others, the closing of their businesses. Everything was affected, savings were depleted, and debts skyrocketed due to non-payment. It was a total financial disaster which we all know will lead to different problems.
After two years, as things are trying to get back to normal, bouncing back financially is a little bit hard, especially with accumulated debts. Well, there are a lot of problems that arose during the pandemic, but let us focus on debts because this is something that my family is experiencing right now.
From what I have observed from how my mother is tackling accumulated debt, here are three starter steps she adopted to start repaying her debts:
1. Finding a Job or a Second Job.
If you lost your job, as my mom experienced, she immediately looked for a job. Though she had part-time jobs, she needed a job with a full-time income. So looked for a job to expand her income. She needs to keep the cash flow flowing to afford repayment.
Finding a job or getting a second job can help you earn extra income. You secure the basic needs and have extras for repayment and savings.
2. Consider Debt Consolidation.
She has a lot of outstanding debt. She got stressed with many due dates to watch out for, thus considering debt consolidation. She has been reading about this here. Debt consolidation can help lessen the stress by focusing on one debt only. Sometimes, it can help with lower interest rates and smaller monthly payments.
3. Start a Starter Emergency Fund.
Having an emergency fund is crucial. We survived the first few months of the pandemic because my mom had savings. Unfortunately, it was slowly depleted. It took time for my mom to find a job, so she used her savings. Now, my mom is building up her starter emergency fund again. This is just a starter emergency fund. Enough to make things run again while paying off her debts. But of course, she plans to build a solid six months to one year worth of salary as an emergency fund as the current pandemic is still here after two years.
My mom is not totally debt-free at the moment. Her debt is still big, and my siblings and I knew about it. But, she is slowly paying off debts little by little. Last 2021, she closed around five debts – two from a financial institution, and the other three are personal loans.
What my mom experienced is nothing new. It happened to almost everyone. What is important is that we should be proactive in getting out of debt. Let us not waste time as time means more interest. These three starter steps may not solve your debt problem immediately, but it will surely jumpstart your journey to financial freedom.