By financen | March 5, 2008 - 6:45 pm - Posted in Debt, Income

One of the biggest problems that we common people in debts face is to find sources of income that can be applied towards paying the bills. In order to see your debt going down, you have to pay more than the minimum payment, but this can be very hard to do when you are already going through crisis and find extra money.

After understanding the need to generate extra income, here are some ideas that can help you overcome the problem.

  • Tax refund: If you are getting a large tax refund each year, then you can apply a certain portion or the whole refund towards paying your debts. In addition, you should also adjust your withholding so that less taxes are withheld from each check. The tax refund will be lower but you will have more money available that you can apply towards paying your debts each month instead of having to wait for the time of the tax refund. The last thing that you want to do is to give an interest free loan to Uncle Sam when you have high interest credit cards to pay back.
  • Savings: nobody likes the idea to cash out their savings account to pay their current debts. But if you find yourself in a situation where you are paying more than 18% interest rates on your outstanding credit card debts each month, you will have to use your savings to pay the bills. Another reason to use your money from the savings account is because you are earning only 4% approximately for keeping money in that account. It just makes sense to use money from your savings account to pay those nasty credit card debts.
  • Bonuses, raises and overtime: whenever you get a chance to work extra, do it. You will get paid for doing overtime, or if you get a raise, bonus, you can apply that money towards your debts. You will not feel any big difference because this money came to you all of a sudden and it never had an important role in your daily budgeting. Yes, I know you have been going through crisis in the past but you will be using this extra income to pay those bills only because of which you find yourself today in a situation like this.
  • Part time or temporary work: You need to be a hard working person during this time of crisis. You should really not be choosy when you are in a debt bind. Consider getting a part time job and make ways to increase your source of income. A little bit of extra effort today will do big time favor to you in the future.
  • Sell products: another option is to sell things to raise money. Maybe, you should do a yard sale or sell items that are no longer used in the eBay. Sell books that you don’t read on Amazon or You will be surprised to see the amount of money you will create at such online auctions.
  • Borrow from family and friends: I am sure there are many people who hate to ask money from their family or friends. But if you are deep into the hole, and you have someone close to you who is willing to help you during this time of crisis, don’t hesitate to ask for help. They know you better, that’s why they are willing to help you. Just make sure that you don’t play with their trust. And remember the fact that they helped you when you are going through a hard time. Do everything in writing so that you both know what to expect when things have settled down. This way, there wont be any chance of disagreement or hard feelings down the road.
  • Borrow against your home equity: if you have to take this option, don’t take it lightly. You can pay off your debts after you have got a home equity loan, but remember that your home is at risk because you have pledged your home as a security. If you fail to pay back the installments, your property will be seized. Be 110% sure if you decide to borrow money against your home and continue to make payments religiously. Calculate your options and be ready if you have a job loss or other unexpected emergency in the future.
  • Reduce spending: one penny saved is one penny earned. This is the first strategy you should take to find extra money to pay off your current debts. You should not have any unnecessary spending habits. If you have a proper control on your spending habits, you will be able to see more savings that you can effectively use towards your debts. Just for a temporary period, you can save a good portion of money from your food, grocery, entertainment (gym memberships, magazine subscriptions, cable, internet, trips to the book store) and personal care (haircuts, clothing, housekeeping, etc.).
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