Debt is becoming a common part of life for the average American as consumers are now spending thousands of dollars on credit and debit card, auto loan, tax, student loan, medical and residential mortgage debt each and every month. Data shows the average household owes more than $15,000 in credit card debt, which is just a portion of the debt landscape, and with relatively high-interest rates across the board, the situation is unlikely to improve in the short term.
However, debt doesn’t have to be a way of life. You can make positive changes to rid yourself of the financial obligations that are causing stress, worry, and strife. With a cool temperament and a stringent budget, you can kick debts to the curb in quick time.
Haphazard planning and a poor use of your available resources often exacerbate financial woes. A robust strategy will finally bring a sense of order to your debts and enable you to diligently budget for the future. Begin by collating every statement and record of your debts to determine just how much money you owe.
Now you know the scale of your debts, you can start to look at methods of paying them off. For those with high amounts of credit card debt, use the stacking method to focus your efforts of the card with the highest rate of interest. Once you have you paid that off, move on to the second highest and continue that trend until the debt has been repaid. The snowball method is also viable and involves paying off the smallest debt and moving up. This may be best if you want to feel like you are making headway with your repayments, as you will settle certain debts more quickly.
Switching your credit card debts via a balance transfer is a great way to consolidate multiple debts into one monthly repayment and take advantage of lower rates of interest. It is possible to get zero percent introductory rates so paying off your existing debt during this period will save you money. It is also important not to make any further purchases on this new card because you will only add to your debts. Using a price comparison site will find the best balance transfer credit cards available to you.
Negotiate or refinance
Negotiating or refinancing your mortgage and other debts with lenders can really make a difference so don’t be shy about asking for a change in terms. There are also charities such as the Hardest Hit Fund (HHF) that aim to offer assistance to those in debt. HHF provides aids in states hit by the subprime mortgage crisis and the program was recently extended until at least 2020.
Change spending habits
Adopting a minimalist lifestyle and being frugal with your paycheck will make your money go further and enable you to pay off debts at a faster rate. Any luxury purchases should be put on hold for the time being and try to buy only cheap, essential items. Evaluating your monthly outlay and budgeting for food, utilities and debt repayments for each month will help you to stay on track, so use a debt payoff calculator or similar resource to get your finances in order.
It’s natural to feel overwhelmed by the scale of debts. Getting in touch with the National Foundational for Credit Counseling or a professional financial advisor can help you to make sense of your situation and to find a way to move forward. Whatever your current predicament, there is always a solution so don’t despair.
What are some other tips you have for getting out of debt?