4 Simple Tips for Paying Off Personal Debts or Eliminating Them Completely
Nobody plans on winding up with tens of thousands of dollars in debt – yet somehow, the majority of Americans do.
Sometimes it stems from using credit cards to cover unaffordable expenses like home repairs or to pay the bills during a temporary unemployment. Other times it’s a result of expensive student loans. Perhaps the debt is from medical bills related to an unexpected injury or illness. Or, if you’re like the average American, it’s a mixture of all of the above.
Ultimately, it’s not what caused your debt that matters, but how you deal with them. The only thing worse than having debt is being in denial about your debt. Ignoring your money troubles allows debt to grow unchecked, eventually leading to maxed out credit cards, rock-bottom credit scores, calls from bill collectors – and even the risk of losing your home to foreclosure or your assets to creditors.
We all know that getting out of debt is easier said than done. But often times, just getting started is the hardest part. If you can get over that first hurdle, tackling debt is within your reach – though the method you use to eliminate debts will vary based on your financial situation. Here are a few basic steps that can help you get started down your path to freedom from debt.
Out of sight is out of mind – and that’s not a good idea when you’re in debt. Though it sounds painful, listing your debts will give you a clearer picture of what you owe and how to pay it off. Thankfully the Internet makes it easy to stay on top of debts. Go to the websites of banks, creditors, and any other financial institution you owe money and print out information on your balance, interest rate and minimum payments.
Now that you know exactly how much you owe and to whom, you’ll need to figure out some short-term goals to make getting out of debt more manageable. Take a look at your budget and determine how much you can reasonably repay each and every month. Divide the total amount of debt you’d like to repay by your monthly estimate to get an idea of how long you’ll need to make payments. Of course, it will take a little longer once you factor in interest, but this is just intended to give you a ballpark figure.
It’s normal to feel overwhelmed at this point, but just remember to take it one day at a time. It’s better to pay a little towards debt than to get so panicked that you pay nothing. Starting with your highest APR debt will ensure you waste less money on interest, freeing up more money to pay down other debts later on. Known as the “snowball plan,” this method can help keep you motivated while under the pressure of large debts.
Plug Spending Leaks & Find More Money
The more dollars you can put toward paying down debt, the faster the process will go – and the more money you’ll save. If you’re having trouble affording repayments, it may be time to reassess your budget. Can you trade in your car for something more affordable? Give up the $70 cable bill for a $10 Netflix subscription? How about selling clothes, electronics or other items you don’t need on eBay? Can you turn skills or hobbies into a second source of income? A little bit here and there can add up to hundreds of extra dollars each month.
Know When to Ask for Help
Sometimes debt goes unpaid for a reason. If you’ve fallen into such a deep hole of debt that you’re emotionally overwhelmed and can’t imagine being able to pay the bills, you may need a more powerful strategy: bankruptcy. Unlike debt settlement or consolidation, bankruptcy offers an effective, lasting solution to unmanageable debt. Under a Chapter 7 bankruptcy plan+, unsecured debts like credit card debt can be discharged completely, often in just a few months. A Chapter 13 bankruptcy plan allows you to make monthly payments to creditors over a three- to five-year period, protecting your home and assets in the process – and allowing you to discharge remaining debts at the end of your case.
There’s no shame in getting help with your debt – especially if that help is your best chance at financial freedom. If debt is running your life, consider speaking to a qualified bankruptcy attorney to determine the best debt relief plan for your family.
8 Easy Steps We Used to Pay Down $60,000 in Debt – Fast, DailyFinance