We’ve all heard the phrase “money can’t buy happiness,” but when it comes to your financial health and well-being, money is an essential element. If you’re feeling overwhelmed by your debts, you’re not alone.
Millions of us are struggling to get their finances in order. But there is hope. There are plenty of ways to get help and start getting your debt under control. In this post, we’ll explore some of the best ways to tackle your debts and get back on track financially. So don’t despair – read on for tips that can help you take charge of your money and your life.
Create A Budget
The first step to paying off your debt is tracking your spending. It’s important to know what you’re spending money on. And how much of that money is going into savings vs. non-necessities like eating out or entertainment. You might also want to set a target for how much you want to save each month.
When it comes time for creating a budget, use the 50/20/30 rule: 50 percent of your income should go toward necessities such as rent/mortgage payment and utilities. 20 percent should go toward savings goals such as retirement accounts, emergency funds and college savings plans. 30 percent can be used however you see fit (including paying down debt).
This means that if you earn $2,000 per month after taxes. $1,200 will go towards those three areas while $800 remains in your paycheck. And this doesn’t even account for anything else that falls under the “fun” category (like going out with friends).
While this method may seem strict at first glance. There are tools out there that can help make it easier on everyone involved in tracking their finances. Apps like Mint allow users to set up budgets based on their income levels. So they don’t have to worry about forgetting when bills come due every month!
Stop Borrowing More Money
It’s not the best way to live, but it is one of the most effective ways to tackle your debts. It means you have to stop borrowing money and using credit cards. If you have a debit card or pre-paid card as a backup, that’s fine – but use them only when absolutely necessary.
If you can start saving up for what you want to buy instead of using debt, then do so – even if it takes time. You’ll be surprised how quickly your savings can grow if you stick with it.
Call Your Creditors To Work Out A Payment Plan
A fourth and final step is to call your creditors to work out a payment plan. This might seem scary. But it’s really not that bad. You can find their contact information on the back of any credit card statement.
Or, your monthly bank statements and ask them to speak with you about setting up a payment plan. It’s important to remember that they are people too, so don’t be afraid of speaking with them.
Tell them that you’re having financial difficulties, then ask if they have any options for setting up a payment plan that works best for both parties involved (you and the creditor). If they say no, ask again!
Keep asking until someone helps you come up with an affordable alternative (or at least gives some useful suggestions). Tell them how much money you can afford each month. Then show them how much debt you want paid off by when—and stick with it.
Reorganize Your Priorities
In order to make your debt a priority, you need to first reorganize your priorities. You might be surprised how much money you’re actually spending on non-essential items.
For instance, if you have a $50 monthly cable bill, that’s $600 per year that could be going towards your debt instead. A few small changes like this can make a big difference in the long run.
Another way to reorganize your priorities is to create a Debt Reduction Plan. This is where you list all of your debts from smallest to largest. Then focus on paying off the smaller debts first. Once those are gone, you can put all of your extra money towards the next debt on the list until it’s gone too.
The Debt Reduction Plan is a great way to stay focused and motivated, because you can see your progress as you go along. This method also saves you money in the long run. Because the sooner you pay off your debts, the less interest you’ll have to pay.
Consider Debt Consolidation
The first step to tackling your debt is to understand exactly what you owe. Take a look at your credit card statements and other bills. To get a sense of how much money you’re spending on interest payments every month.
That amount is what you could save if you consolidated those debts with a personal loan or home equity line of credit.
If the total amount owed is less than $10,000, consider using an online personal loan calculator to find out how much it would cost over the life of the loan. But be sure that any company offering this type of service is reputable before applying for one.
Pay More Than The Minimum Payment
Even though it may seem like you’re paying a lot, the minimum payment is not enough to pay off your debt. The minimum payment is usually only 2% of your balance, so if you have a $5,000 balance on a credit card with an 18% APR, making only the minimum payment will take you over 43 years to get rid of that debt!
Not only that, but because the interest rate isn’t being reduced (due to not paying enough), it’s actually going up every month.
Every time new purchases are made, or cash advances are taken out from other credit cards, most people go back to paying just their minimum monthly payments instead of focusing on facing their debt head-on and getting rid of it once and for all.
Stop Using Your Credit Cards
Stop using your credit cards. When you’re in debt, it’s easy to think that the best way to get out of it is to keep spending money as usual. But in reality, this can be one of the worst things you can do. If you don’t stop using your credit card and start paying off what you owe immediately, it will become even harder for you to pay everything back later on.
Instead of charging more purchases onto your card each month, focus instead on paying down what’s already been charged up—and then continue making payments until all that debt has been paid off entirely.
Use cash instead of a card wherever possible—it’s much easier not to spend money when there isn’t any in front of us.
Refinance High-Interest Debts
Lenders offer a variety of products and services, so it’s important to shop around. For example, one lender might have a lower interest rate but higher monthly payments than another.
Or perhaps two lenders will both offer you the same total monthly payment, but one has a lower total interest rate and another has a lower minimum monthly payment. The best way to find out which lender is right for you is by making an appointment with your current lender or calling them up and asking about their refinancing options.
Plan Ahead To Pay Off Your Debts
If you’re struggling with debt, the best way to get on top of it is to plan ahead. You’ll need to take a look at all your bills and make sure that you have enough money coming in each month to pay them off.
Then, once you know how much money you can afford each month, start paying off your debts—paying more than the minimum monthly payment will help save you time and money.
Next, stop using credit cards completely or cut up any that have high interest rates. This can be difficult because many people use their cards as an emergency fund when they run out of cash unexpectedly, but if this behavior continues over time, it can lead to even more debt down the road (and possible bankruptcy).
If this sounds like something that often happens for you and/or your partner/family members, think about refinance high-interest debts into one low-interest loan so that all of those payments are going towards one bill instead of multiple ones with different amounts due each month (which could potentially confuse someone who isn’t used to keeping track of his or her financial situation).
In conclusion, the best way to tackle debt is to open a savings account and make regular deposits into it. The bank will then pay you interest on your deposits. This will help you keep up with any extra costs involved in your home or car loan.
Make sure that you’re also checking your credit rating at least once every three months. If there are any problems with it, then contact either the lender or consumer reporting agency immediately, so they can be dealt with promptly.