7 Tips on Tackling Debt
There are numerous ways in which a person could get into debt. Trouble in the job market, relationships, money management issues, loans, poor credit card spending, and unexpected expenses can all quickly add up.
Whether the debt is small or large, many people manage to pay off their debt successfully with some discipline and planning. Many even find themselves able to set the course for healthy debt and money control for years to come. We’ve compiled some basic information for those seeking victory over debt and personal financial literacy.
It starts with you. Setting good mental habits in place to pay off immediate debt often leads to life-long mindset shifts in money management. These shifts are what continue to help people not only stay out of debt in the first place, but contributes to paying off debt faster, keeping funds under control, and thriving financially.
A large factor in debt management is understanding your lifestyle and your income, and setting your own goals. This is also critical in helping one decide which purchases to make (or not to make).
Some Debt is Good
Being in too much debt is an issue, but having a little debt can be vastly beneficial. Debt allows a person to get on the credit grid; with every debt that is paid off, the credit score increases. Paying off debt regularly and building a higher credit score will allow a person to get better offers on loans, mortgages, etc.
Although having a little ongoing debt can be good, making sure that debt can be paid off consistently is key.
7 Tips for Paying Off Debt
Paying off debt has a positive impact on one’s credit and financial well-being. Below are some strategies for not only getting out of debt quickly but general money management.
Make a List of Monthly Expenses
Make a monthly list of expenses including everything from rent or mortgage payments to groceries and gas needed for a vehicle. Estimate the amount each expense costs throughout a month and see what can be cut. This is not necessarily something that needs to be a permanent cut but gives a person in debt an idea of where to obtain some extra funds.
For example, many people are surprised how much money they spend eating out at restaurants vs. buying groceries. Or buy a cup of coffee each morning vs. having a coffee set up at home with a to-go mug. A few bucks saved each month can add up quickly. Reallocate the necessary funds to pay off debt.
Determine Minimum Monthly Income
Setting the time aside to determine the minimum amount of income made a month is crucial to visualize the boundaries of a monthly budget. This is especially so if someone has an unsteady source of income or multiple part-time positions. This is also vital in determining if one is living beyond their means and must cut out unnecessary expenses.
Pay at Least the Minimum on Each Bill
Having a stream of active payments is much better than nothing at all, and this shows an effort is being made to pay off the debt. Companies tend to be a lot more forgiving with people who are chipping away at their debts vs. ignoring them. This is also a red flag for debt collectors.
If Extra Money Is Available, Make Extra Payments
Companies are often glad to allow multiple payments to be made in the same month.
Focus on the Highest Interest Rates First
This helps prioritize payments, as interest drastically adds up over time. Paying off cards with higher interest first decreases the overall debt owed.
Watch Out for the “Quick Fix”
Unfortunately, there are a lot of scam artists out there who attempt to profit off of debt. Be aware of “pay off your debt quickly” advertisements that ask for additional payments or credit card information. These seemingly quick fixes often result in identity theft or additional charges. This will not assuage the issue and will likely worsen debt.
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