5 Steps to Help You Manage Your Debts

 

Being in debt is not necessarily a source of stress if you have effective money management strategies and long term plans in place, but unfortunately, this is not always the case. When debts pile up and interest rates soar, the situation can quickly spiral out of control. This is when many people tend to bury their heads in the sand and to avoid the issue as much as possible. Obviously, this is not going to make the problem disappear and is, in fact, more likely to exacerbate the situation. The best approach to getting out of debt without feeling overwhelmed is to create a step-by-step plan and tackle each stage as an isolated task.

Here are five steps to follow to help you to manage your debts and take control of your finances once more. 

 

  • Look at your credit information

 

Before you can get out of debt, you need to have a clear picture of where you are financially. You need to find your most recent statements for loans and credit cards, your credit report and score. 

 

  • List all of your debts, payments, and income

 

Once you have all of your credit information, you need to list your debts, including the creditor, the balance, interest rate, and minimum monthly payment. With a total figure for all of your debts you can work out how much you would need to repay each month to be able to clear your debts in one, two, three or however many years you setting as a timeframe. 

Next, you need to add in all your monthly outgoings such as groceries, medical bills, insurance, utilities, etc. You can then compare your monthly outgoings and debt repayments against your income to work out what is realistic.

 

  • Reduce your interest rates

 

If your interest rates on credit cards or loans are high you will be paying much more back than you originally borrowed. Even if you are making payments each month, you may only be paying interest and not making a dent in the actual debt. Find out if you might be eligible for a low-interest credit card or loan which you could move the debt to so you can pay less or even zero interest. 

 

  • Try to pay more than the minimum payment

 

If you can try to pay more than the minimum payment each month. Just a small amount more than the minimum will add up over 12 months and enable you to meet your debt-free goal sooner. On the other hand, you are under no obligation to make more than the minimum payment. If your creditors are taking legal action against you, seek out legal assistance with your debt lawsuit by contacting an experienced lawyer. 

 

  • Explore other income streams

 

One of the best ways to clear debt sooner is to increase your income, but this doesn’t necessarily mean finding a new job with a higher salary. Consider ways in which you could make extra money on the side at the weekends or in the evenings. This could be doing odd DIY jobs for others, walking dogs or even blogging. The other side to earning more money is to try and spend less as this will also increase how much you can redirect to your debts.

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