In 2019, consumer debt rose 6.9% to a record of $4.19 trillion in December.
Many of us have personal debt whether it’s paying off a vacation, necessities, or just bad spending habits. Regardless, it’s important to know how to deal with debts so you can pay them off as fast as possible.
Not sure how? Don’t worry, we’ve got you covered. Here are nine tips on how to manage your personal debt.
1. Create a Monthly Bill Payment Calander
One of the most important debt management tips is to know who and how much you owe. First, list your debts and include the creditor, total amount of debt, monthly payment, and due date.
Having everything recorded lets you see the bigger picture so you know which ones to pay off first. This should be the debt with the lowest balance first.
You should refer to this list whenever you pay bills and update it as the amount of what you owe changes. A way to improve your debt management is by creating a bill payment calendar.
Write each bill’s payment next to the due date and add the date you get paid. Again, this will show you which bills to pay with which paycheck.
You could also consider any assets you can sell, perhaps a recreational vehicle or a second car. Turn in your new one and buy a quality used car as it will save you thousands.
And never be ashamed to ask family or friends for financial help. If you do this, create a detailed outline of repayment expectations so there are no misunderstandings.
Or, if possible, consider refinancing your mortgage so it lowers your monthly payment.
2. Pay Your Bills On Time
Late payments make it harder to pay off your debt because you’re often charged with a late fee whenever you miss one. And if you miss two consecutive payments, your interest rate and finance charges will increase.
Set an alarm a few days before each payment so you don’t miss it. If you do, send your payment as soon as you remember it’s missed to try to avoid penalties.
If you’re really struggling, browse debt relief companies to find one who can help you or consider personal loans.
3. Strive to Pay More Than the Minimum
To manage your debt, pay more than the minimum otherwise it’ll take ages to pay off your balance even if it’s an extra $50 per month.
And if you can only make the minimum, pay it. Although it doesn’t make fast progress, the minimum makes sure you’re not paying for late fees.
4. Pay off Expensive Debts First
A good way to manage debt is to make minimum payments except for your biggest one. Find the one charging you the most interest and focus on paying that one off first.
When you’ve paid the most expensive one off, take all the money you were paying and focus on the next most expensive debt. Keep doing this until you’ve reached the least costly debt and it’ll get you out of debt quicker.
5. Outline a Monthly Budget to Plan Your Expenses
Your monthly budget must be realistic enough that you can cover expenses. Plan in advance and adjust it early if you don’t have enough money for your bills this month or the next.
A budget also highlights any surplus money which you can use to pay off your debts. But it’s important to track what you actually spend otherwise your plan won’t work.
The plan will teach you about your spending habits so you know where to cut back.
6. Spend Less than You Plan to Spend
Although it’s tempting, don’t buy everything on your wish list especially when you can’t afford it. Many people get into debt because they buy without considering their paycheck or bank account.
Try to be satisfied with less so you can use the money you’ve saved to pay off your debt. You may eventually find your priorities have changed and you start building up an emergency fund or adding to your pension.
7. Reduce Your Grocery Bill
In 2019, American households spend 9.5% of their budget on food.
There are many ways to save money on groceries like bulking up on items that are on sale or do one large shop a month. Stockpile non-perishable goods like canned goods, cereal, items you can freeze like bread.
8. Get a Second Job
Many people in debt get a second job or pick up an extra shift. It’s not practical for everyone but if you can, consider it as you could be debt-free quicker than you think.
To make this work, funnel your extra income to debt repayment so gradually reduce it. Once everything’s paid off, you can return to your normal life.
9. Speak With a Credit Counsellor
If you’re in debt and feel bankruptcy is your only way out, contact a credit counselor. A reputable one will look at your situation and find a realistic option so you can start reducing your debt.
You’ll be surprised how much you’ll learn through these sessions so it’s important to act quickly.
That’s How to Deal With Personal Debt
Now you know nine surefire ways to handle your personal debt.
It’s important to create a monthly bill calendar so you know which payments are the most important. Aim to pay off the expensive bills first and aim to cover more than the minimum so you make quick progress.
If you’re struggling, consider debt relief companies or a credit counselor to guide you throughout the process. Good luck!
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