If you think that we are out of the debt crisis, think again. This is not to scare you or anything but you should not allow yourself to be lulled into a false sense of comfort because we are not out of the debt pit. It is probably true when the government tells us that the employment rate is getting better but you have to know that we are not yet out of the danger zone. If you look at the US Debt Clock website, you will see just how much our debts are still rising.
Of course, there are several sources that contributed to the figures but the point in fact is, we still have a long way to go.
In our own personal lives, we each have our own financial difficulties and if you are still going through a debt crisis, you are probably looking for a way out of it. Well here are two things that you can do: earn more or spend less.
The logic for this is to grow your debt payment fund so you can get out of debt a lot faster. You want to keep the interest amount on your debt low and that can be achieved if you pay off the debt quickly. It can save you a lot of money especially when you are dealing with credit cards.
However, the question on people’s mind is this: should you concentrate on earning more or spending less?
Why increasing your income helps in debt relief?
Some people think that earning more is a lot better than spending less because of the following reasons:
There is no limit to the amount that you can add to your funds.
You don’t have to change your current lifestyle.
The children are shielded from the debt crisis as you are absorbing the burden by doing more work.
You can build up your funds not only for debt payments, but also for your savings and even some investments that will grow your personal wealth.
There are so many options to earn more money so you can pay your dues. If this is where you want to concentrate, it helps to find a way to do so without exhausting your physical and mental self in the process. That is the drawback in choosing to increase your income. You will have to exert more effort just to supply the needs of your family and the debts that you have accumulated over time.
Another drawback is that you most likely will not learn your lesson. Since you are not changing your lifestyle, you will continue with the extravagant way of living that got you in debt in the first place. If you are not careful, you could end up in the same situation even after you have gone through all the debt relief efforts in the past.
What can you learn by lowering your expenses while in debt?
On the other hand, trying to lower your expenses instead of earning more will provide you with the following benefits:
You are forced to live below your means – which will decrease the chances of you getting yourself in debt again.
You will learn how to budget.
You learn how to choose where you spend you money on – thus eliminating all your bad spending habits.
You create a new lifestyle for the family that will teach all of you how to value your money.
If you choose to focus on decreasing your spending, that will give you a limited increase in your debt payment fund. That is the drawback for this option. There is only so much that you can cut back on and this will keep you from getting out of debt a faster. Not only that, you may lose the chance of putting some money into your savings.
Which of the two gives better results to help with debt?
At this point, you can probably figure out what the solution is right? The answer to the question, which of the two: earning more or spending less, can help you best with debt relief is already irrelevant. You need to combine the two so you can become debt free.
If you use both, you don’t have to work too long in order to meet your payment obligations. The savings that you will get by cutting back on your usual expenses will add to what you can send towards your debt. More importantly, spending less will help you (or force you) to practice the right habits that will not only get you out of debt faster but also keep you from landing in that spot again.
In the end, what is important is what you will learn out of this situation. Given that, you know that spending less is the better option. However, to keep your life from being too miserable, you need to increase your income so you can still afford to enjoy the finer things in life.
The bottom line is, if you really want to keep your debts from getting worse, you need to spend less than what you are earning. Here is a video that you can watch to help you understand how to accomplish that.
Diana hates debt just as much as you do. She is a finance writer for National Debt Relief. She aims to provide the best information to win the battle against debt.