Have debt? If the answer is yes, you are not alone. Millions of Americans, just like you, face the day-to-day struggles of life and the pressures of growing debt. There are many types of debt, but the more common and fastest growing ones tend to be medical and credit card. Regardless of how you acquired your debt, when it becomes unmanageable, it can affect every aspect of your life, including your physical health, your marriage, your job, your children and your mental well-being. If you are ready to tackle your debt and begin to enjoy the lighter side of a debt free life, we’re here to help. Go ahead and take some notes while we highlight five ways to begin managing your debt.
BUDGET
Let’s start with the old tried and true method of budgeting. Most of us do not attempt to budget, primarily because we do not know how. To get started, trust this simple process.
Step 1: Make a list of all your monthly bills, along with those you owe money to, but are not currently receiving a payment.
Step 2: List your payments including their current interest rate and due dates.
Step 3: List all your deposits and income.
Step 4: Subtract your expenses from your income to determine your balance or shortfall.
Knowledge is powerful and collecting this basic information is the first step to managing your debt.
CALL YOUR CREDITORS
These may be the calls you have been avoiding, but taking a proactive step toward a calm and rational discussion about an unpaid debt can be very productive. You may be surprised what can happen if you politely reach out and explain your situation. Many businesses can be understanding of financial crunches and will work with you on a customized or reduced payment plan. At the end of the day, many creditors are satisfied knowing you’re paying something, even if it’s not the original payment amount.
ATTACK DEBT ONE AT A TME
Going on the offensive with your debt and charging full force ahead is ambitious, but in most cases not effective. Tackling one debt at a time has proven to be successful. This does not mean you stop paying on all debt, but instead, you will make minimum payments on all of them, but any extra funds will be put toward the one with the highest interest rate. In reviewing the budgeting steps you outlined earlier, you can now easily determine which payments have the higher interest. Focusing your extra funds toward that higher interest debt and exceeding the minimum payment amount will ensure it is paid off quickly. Once that debt is cleared, redirect those same funds to the payment of your next highest interest debt. Rinse and repeat until all your debt is paid off.
MAKE IT HARDER TO SPEND
As you address your current debt load and begin to see some success, that little extra cash or a credit card with an open balance may be tempting you to make purchases or plan events which will soon leave you feeling buyer’s remorse. To avoid this pitfall, it is a good idea to implement strategies to make it harder to spend money. When it is a big or an online purchase that is temping you, step away. Give yourself some time to think it over. If you have a credit card, leave it at home. It’s easy to impulse shop, and sometimes taking a moment can help you realize the item is a want and not a need. Try transferring extra funds from your checking into a savings account, as out of sight can mean out of mind. Some find keeping extra funds as cash and tucking it into a safe at home, or even better investing it into a short-term certificate of deposit, can make it less tempting to touch. Find a strategy that works best for you and stick with it.
TALK TO A FINANCIAL COUNSELOR
Different than a financial advisor, a financial counselor is a better choice when it comes to managing your debt and working to develop new spending habits. At Dakotaland Federal Credit Union, our Certified Financial Counselors possess the skills and knowledge required to guide you to sound financial decisions. They can provide a free review and assistance to help manage your current debt and move toward eliminating it. A customized debt management plan may include debt consolidation, reduced interest rates and affordable monthly payment based on your budget. The need for a workable debt management plan is critical for your overall financial health and well-being. Get started today by scheduling your free and confidential debt management review and experience the peace of mind financial freedom can bring.
