8 Effective Ways to get out of Debt

8 effective ways to get out of debt


 The National Confederation of Commerce in Goods, Services and Tourism ( CNC ) frequently monitors the number of families with outstanding debt. In April of this year, it was reported that 77.7% of Brazilian families have open accounts and no prospects for payment. And this number continues to grow, since since the beginning of the pandemic there has been a significant increase in the number of people in debt in the country. 

“This percentage has fluctuated over the years due to inflation and the Covid-19 crisis. People in the most socially vulnerable situations are the most affected. According to data from Serasa, 62.5 million Brazilians were in default in the month of May, that is, in arrears regarding the maturities of their accounts, within each particularity. The average amount of debt per person is R$3,937.38, the highest in the last 12 months. Each overdue account has an average value of BRL 1,162.43.”, highlights Brad Liebmann, executive of a fintech focused on bringing financial justice through fairer practices.

In the monitoring carried out by CNC, it is also possible to understand how these debts arise. The vast majority happens due to the use of credit cards or loans , financial products that have high fees. And it is precisely because of this lack of clarity, fair prices and lack of financial education that result in debt.

But if you're getting organized to get out of debt, don't worry! The executive separated some steps to assist in this journey of settling financial pending issues that take away sleep. To do this, Brad divides this goal into two steps. Check out:

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1st step: the obvious works

If you are trying to organize yourself financially to get out of debt, it is common for you to realize that most people will always say the same thing. But that's because the obvious works and is sorely needed . See what you can do in this first moment to get out of the red.


Map your expenses and prioritize what you need:

To organize your financial life, it is essential to put it on paper, a spreadsheet or, however, your monthly description is best. Name the account, enter due date and amount. Understand what is fixed and variable expense and eliminate what is not a priority.


Review your habits

At this point, it is very important that you understand where your money is going . Expenses such as electricity and food cannot be cut, although they can be reduced. In this sense, gather the family and share the current situation, show the expenses and what can be done together to overcome the difficult time.

Some useful tips for this are:

  • Baths can be faster;
  • Lights don't have to stay on in all situations;
  • The grocery list probably also contains expendable items;
  • Journeys of a few kilometers, such as going to the bakery, for example, can be done on foot or by bicycle, it is not necessary to spend fuel - which is expensive - to make such a journey, in addition to spending on car repairs;

In addition, it is essential to eliminate expenses that are not considered fundamental for a while.


Take care of credit card and installment debts

Be careful with installment purchases, even those that do not have interest. They create a false sense that we are spending little, but you may be in for a big surprise at the end of the month. 


It is also worth remembering that credit card interest rates are very high. To avoid this type of charge that can destroy your financial planning, always pay the full amount of your credit card bill.


Choose the right account for you

Currently, there are several options for bank accounts that do not have fees. And, some of them have the plus of making your money earn even without making any application. So it's also interesting to evaluate an option that makes sense for your pocket, okay?


2nd stage: organizing your financial life

In addition to getting out of debt, you need to have goals to save money and keep your bills in the blue. In this case, the executive also makes four more recommendations that can keep you out of debt.


Negotiate your debts

If you are in arrears, try every possible form of negotiation, especially for debts that have been accumulating for a few years . Currently, there are options with lower interest rates and better installment conditions that fit your budget. 


Be careful with investments

After paying your expenses, do not use the leftovers for risky investments or with remuneration below the debt interest. If the debt is 10% and you have the option of investing in something that pays you 9% without risk, it is advisable to use the money to pay the debt and not invest. After all, your debt would grow faster than your investment.


Find an extra income source

Brazilians are very creative, and there are several spaces in different segments for new businesses. Research, talk to friends and family, understand the possibilities that can lead you to have a source of extra income.

But be careful, it is necessary that this second source is an extra profit and does not take you even more money. The basic rule of thumb for a healthy budget is that the sum of your income must always be greater than the sum of your expenses.


Create an emergency reserve

Essential in unforeseen times, the emergency reserve is precisely that money that can keep you in extreme cases such as job loss, health problems or other needs that arise throughout your life. For this, Brad recommends that the ideal is to save a little a month until you have enough to pay all your expenses for at least six months. 

Those who are in debt can suffer a series of consequences, such as the negation of the name and the protest in the notary. Worse than that, the debt can even cause the loss of the asset , in the case of financing or loans with a property or vehicle guarantee. Not to mention the emotional stress that debt causes.

Finally, the executive also leaves some important information to maintain good financial control. “If you have any debt that you were unable to pay, contact the company and propose a debt renegotiation . Remember that the sooner you get out of this situation, the calmer you will be, both in terms of your finances and personal life”, concludes the professional.