It’s almost impossible for people to live completely debt-free these days. Life can be expensive and jobs aren’t always paying out as much as we’d like. On top of that, most of us simply won’t have enough money on hand to pay out-right for our homes, cars, and college expenses.
Holding some debt, for most people, is a standard part of life. The good news is that debt can allow you to get access to crucial opportunities, like a home for your family to live in, and a car you can use to go to and from work. However, just because there are some good sides to debt doesn’t mean you should be building it up wherever you go.
While it’s easy to get into debt, getting out isn’t such a walk in the park. That’s why we think it’s so important to know exactly what you need to do to take control of your finances and give yourself a little bit of stability. Here, we’ll cover seven considerations for managing your debts.
1. Are You Honest About Your Spending Habits?
It’s all too easy for people these days to convince themselves that they need to spend a little bit extra here and there. Whether it’s a few dollars for happy hour or a little more for a designer coat – it can add up fast! Giving yourself excuses for what can grow into dangerous spending habits doesn’t help you, or your family. Instead, it simply increases the risk that you’ll end up in a troublesome position.
Being honest about your spending habits, on the other hand, will help put your spending into perspective, so you can improve your overall finances. Think about writing all of your expenses down in a book each day. This can help you identify unnecessary expenses and spending habits that you can improve.
2. Make Payments with Cash, not Cards
It might seem old-fashioned, but making payments with cash instead of card can be a great way to get your spending back under control. It’s easy to spend more than you should with credit cards, because you don’t actually see the money leaving your hand. However, when you have to actually hand over dollar bills and see you finances shrink, you might begin thinking more carefully about how you should (or shouldn’t) be spending your money.
3. Give Yourself a Budget
Once you’ve properly taken the time to look at your spending habits and figure out where you’re may be wasting money, you’ll be able to put a budget in place. Putting together a budget is one of the most important things you can do when it comes to getting rid of debt. However, the process will require a lot of patient and some planning. The first step is to begin by tracking your monthly income and expenses. Once you’ve figure those basic numbers out, you’ll be able to think about ways you can reduce your expenditures.
Try setting part of your budget aside specifically for “savings.” This will help you start creating a safety net that you can use to fall back on if an unexpected expense arises or something goes wrong that needs fixing immediately.
4. Put Your Debt Payments on Auto-Pilot
Part of managing your debt is paying it off as quickly and effectively as possible. Unfortunately, when there’s so much else going on in your life, it can be difficult to remember that you need to send a certain amount of cash to different financial accounts each month. With that in mind, try putting as many of your loans, credit card payments and other monthly expenses on auto-pay as possible. This will help you avoid incurring unnecessary late fees and penalties.
5. Prioritize Your Debts
There’s a good chance that you won’t be able to repay all of your debts at once each month – especially if you are managing multiple financial accounts. Consider prioritizing which accounts and debts you should pay. Give the highest priority to your secured debts, such as your auto loan or mortgage since you don’t want to lose your assets. Next, focus on debts that can’t be discharged, such as unpaid federal taxes or student loans.
Once you’ve gone through the essentials, identify the credit card with the highest interest rate and pay that one off first. This way, you’ll save yourself some money by reducing outstanding balances subject to excessive interest rates.
6. Make Sure You Know How Much You Owe
One of the biggest problems people have with debt management is that they are so eager to ignore their debts, that they never really deal with them. Although you might like to bury your head in the sand and hope for the best, it’s much more efficient to think carefully about where you owe money to. Figuring out where you money should be going will help you avoid any nasty surprises in terms of interest costs.
7. Get Some Help
Finally, if you’re struggling to manage your debts alone, then don’t suffer in silence. Sometimes, debt can be an overwhelming and isolating experience. It’s important that you turn to the right people for help when you feel like you can’t cope. There are countless organizations out there designed to offer help to people with debt-related issues. these groups can assist you with making a budget and even reaching out to your creditors to see if you can make your payments a little more manageable.