Drowning in debt? You’re not alone. In today’s world of student loans, never-ending mortgages, and accumulating credit card bills, countless people are struggling to pay off debts. If you’re finding that your life is a never-ending story of overdraft charges, delinquent accounts, and financial stress, it may be time to take charge and rid yourself of your debt situation once and for all.
Here’s a few tips to help with debt management and get your life back.
Create Actionable Debt Management Goals
Make a list of all the non-negotiable expenses, such as rent, mortgage payments, and loan payments that you are obligated to make each month. Look through materials like old bank statements and receipts to get a more exact idea of where your money’s going, how often, and at what amount. Seeing it on paper will give you some perspective. Add the numbers.
Next, compare this total to your income. Again, review documents like pay stubs and direct deposit forms to assess your cash influx. Now compare the numbers. Is the gap between them larger than what you’re comfortable with? Figure out your ideal difference and make this number your goal.
Keep in mind that while it may be tempting to follow minimum payments, interest will multiply the longer your debts remain outstanding. But you don’t want to break the bank either by making maximum payments just to get them out of the way. Try to find a happy medium.
Prioritize and Budget
Once you see how much money you have to be paying per month, you can adjust the rest of your spending accordingly. Look at other expenses you can cut back on. Think of ways you can save money: shopping at sales or discount stores, watching your power usage to save on utility bills, and putting that vacation on the back burner until you’re more financially stable.
Finances are detailed, serious business, so it’s best to keep track of all your documents. Debt is easier to tackle when you’re not so overwhelmed. Here are some tips:
- Keep a cap on credit cards, or switch over to debit, until you’re more comfortable with your debt situation.
- If you don’t already have one, start a savings account and commit to depositing a certain amount of money in on a regular basis. Having a cash reserve will give you some stability, not to mention peace of mind. Even if it’s just $20 a month, you could find that five months down the line, that cushion of $100 you’ve built up is a lifeline.
- Consolidate your bank accounts. It’s helpful to keep your money all in one place, rather than spread out in several, and gives you a better idea of your total assets.
- Pay bills online so that the money is drawn automatically from your account, thus eliminating the potential mess of forgetting to pay on time and racking up fees.
- Keep a calendar of important dates, such as when bills are due.
- Keep up with the mail! There’s nothing worse than overdue payments.
If you’ve exhausted your own resources, or just find that you need professional advice, consider turning to a credit counseling agency. These agencies are staffed with credit counselors, who are trained in the intricacies of the financial industry, can advise you on budgeting, and can even help you work out a debt management plan with your creditors. The way this works is that the counselor, after reviewing your situation, drafts a long-term repayment plan. The counselor then negotiates with your creditor companies to follow this plan, which can entail a reduction, or temporary suspension, of your rate of interest and payment accordingly.
Be careful when choosing an agency. Make sure any agency you sign up with is accredited by the state. Ask questions like:
- Is the information free?
- Do you charge clients fees?
- Is your organization and are your counselors accredited?
- How will you keep my information safe?
An agency should never charge you for counseling or information, and since these agencies will see sensitive documents, make sure they’ll take good care of them. Scams can leave you in a worse state than when you started.
Following these four tips can help with debt management. Now it’s up to you to take action!