3 Tips for Managing Debt of Any Size
Any amount of debt can seem unbearable at times, especially when you are living on a tight budget. But when you can find a way to properly manage your debt you can avoid the added stress it has on your life. Here are a few tips on managing debt successfully no matter how much you may be behind.
Understand How Much You Owe
When you decide to start taking charge of your debt, it’s important to look at exactly how much you owe. It’s possible that you may not be in over your head as much as you think. Start by making a list of all your debts. This list should include the name of the creditor, how much your monthly payments are, your total amount owed, and what your due date is each month. Having a list of everything you owe in front of you will help you see what the bigger picture is. And by keeping that list in an easy to access place, you can stay aware of how much you owe, which will help you plan your monthly budget.
Use a Monthly Budget and Plan Your Expenses When Managing Debt
Once you figure out exactly how much you owe, you need to create a monthly budget plan. This will help to ensure you have enough money each month to make your minimum payments or more. One of the main reasons why we end up in debt is because we miss payments on our bills due to unknown circumstances. When times get tough, we are naturally going to choose to pay for other necessities such as food, transportation, or rent instead of the bills we can put off. This is especially true when it comes to credit card bills or loans. Unfortunately, you only end up creating more problems for yourself by doing this.
Planning your expenses by using a monthly budget will help you set aside enough money each month to pay for all your bills so that you know how much you can spend freely on other non-essential items. You can also set aside money in savings for emergencies so that you don’t have to miss payments on credit cards or loans in order to make ends meet.
Decide Which Debts Must Be Paid Off First
When you are in the position where you can start paying off some of your debt, it’s important to look at which bills you should pay off first and which can wait. Most financial experts recommend paying off your credit card debt first. With their high-interest rates and expensive late fees, credit cards can be the leading cause of debt. Although it’s possible to prevent late fees or collection calls by making your minimum credit card payment each month, you will still remain in debt for a very long time if you never pay more than the minimum amount. Therefore, credit cards should be the first thing on your list of debts to pay off.
Collateral loans and any other substantial debt that require large payments each month should also be considered. Eliminating debt one bill at a time is a great way to help decrease stress and place more money back in your pocket. But if you have a chance to consolidate debt, that’s another option that can help you pay off your bills quickly.