While we all try to stay on top of things, sometimes we find ourselves in a funk that’s really out of our control. And while falling into debt isn’t something you plan to do, the reasons you fall into it are aplenty, like the loss of a job, unexpected medical circumstances or increases to the cost of living.
Clear Debts Fast – Make It A Priority
Regardless of the reasons, and how much you owe, it is still possible to come out of the financial slump with a little managing and diligence. Don’t give up trying when it comes to managing debt. The first step is to take stock of what is owed and understand your debt situation to tackle it. Gather together a compiled list of every debt owed and a statement from each, then begin to manage the debts to get back on track:
Getting Your Financial Situation in Order
- Compile a list of current debts owed along with the most recent statements available for each. Start by sorting these debts into categories that may include: Utilities, rent or mortgage, bank debts, loans, personal debts and credit cards. Then decide on which of these categories requires the most immediate attention. For example, there is nothing worse than owing money to a friend or family member, so these debts should always be repaid first. These debts can even lead to Legal Action if allowed to compile for extended amounts of time.
Gauging Priorities in Debt
- While borrowing money may have been a necessity at the time, interest rates can often overpower even the best-laid plans for repayment. Business Times calls this strategy “watching interest risk”. Categorise any debt that has interest rates at the highest rates to lowest. Those with the highest interest should be the number one concern because they are more difficult to pay off. Consider a payment plan that pays the largest amount to these debts, or possibly repaying this higher interest rated debt with another source at a lower rate, then tackling a more manageable payment. Paying the minimum balance will only sustain, it is important to pay what is owed on the statement if you wish to see debts reduce.Know the difference between Good Debt and Bad Debt.
Creating a Debt Repayment Plan
- Consider creating a month bill calendar to keep further on track with payments. Include on the calendar who and what you owe to better keep a handle on finances as well. Once you have established which debts are the first priority for repayment, generate a plan that can be added to this calendar. While working with one or two high priority debts, continue to make at least the minimum balance on others to avoid racking late fees. AboutMoney.com offers a free, downloadable Monthly Bill Payment Checklist that can assist in generating a reasonable schedule, even if your paychecks fall on different days each month. Other resources may include employing a financial counsellor to assist if all else fails and you cannot get debt under control.Understand how Debt Affects Your Credit Score.
Be patient in your goal to reduce or eliminate debts. The road to debt freedom may take some time, so be sure your plan considers the long-term work that debt reduction may require. Designate an often-used area of your home to keep a folder with most recent statements and your new debt reduction plan and calendar and constantly revise and monitor this until your reach your goal. Staying organised and understanding the nature of your specific debt situation will help to create a unique plan that is right for you and your financial needs.Recommend0 recommendationsPublished in