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TRENDING BASIC MONEY MANAGEMENT TIPS
07.31.2020 / Budgeting « Back to all articles
Reduce Debt with These 10 Steps
It is easy to justify debt in the moment, but there comes a point when it has become a shackle. Carrying a lot of debt is never a good idea, especially in a crisis. Here are some ways to get rid of that burden.
Stop Accumulating Debt
First, stop the bleeding. From this moment forward, do not borrow any more money. This is all about getting the number down, so no more personal loans, no more credit cards (use cash!), and certainly no big purchases that require financing.
Look at the Numbers
When there’s a lot of money owed, it is easy to ignore it and never look at the numbers. Now is the time to get an accurate picture of all savings and checking accounts, and how much is owed, and to whom. Organize this in a way that is easy to read and refer back to.
Make a Budget
If this has not been done already, make a budget. How much is coming in per month, and how much is going out? Make sure to be thorough, this is intended to find out how much extra can be used to knock out that debt.
Create Extra Cash
Take a look at that budget and see where extra cash can be “created”. Where is there wasteful spending, such as restaurants or shopping, for example? Try to boost the number that will go to pay off debt, maybe by taking on an extra job or selling something valuable.
Emergency Fund
Next, create an emergency fund of at least $1,000. While paying off debt, there needs to be a safety net in case something comes up. Ideally, this is a month or two of expenses, but less will help just to get it started.
Pay More than the Minimums
Paying off the minimums on a loan will usually not bring down the principal at all, especially for credit cards. Start paying above and beyond what is required, this is the only way to reduce the total amount. All extra should go to the principal, not future interest.
Stick to the Plan
There are several great plans and strategies about how to pay off debt. Some suggest doing a calculation of which debts are owed the most interest, others suggest starting with the smallest and going from there. Whatever the plan is, stick to it and don’t deviate or give “rewards” for doing a good job. Consistency is key.
Snowball the Paid-Off Money
Once a particular debt has been paid off, take the money that was going to it before and roll that into another payment. For example, now a $250 bill that is paid off can go towards another $300 payment, which will pay off the bill twice as fast.
Settle Debts if Necessary
It could be that as this plan goes on, some expenses are just not manageable, such as medical expenses. If there is no wiggle room at all, go to the loan holder and try to settle for less. This is very common and could be a lifesaver.
Seek Professional Help
And if this does not work, perhaps a professional financial coach or accountant could help. This, of course, adds another expense, so try to do without first – the results could be surprising!
Credit Talk
07.31.2020 / Budgeting « Back to all articles
Reduce Debt with These 10 Steps
It is easy to justify debt in the moment, but there comes a point when it has become a shackle. Carrying a lot of debt is never a good idea, especially in a crisis. Here are some ways to get rid of that burden.
Stop Accumulating Debt
First, stop the bleeding. From this moment forward, do not borrow any more money. This is all about getting the number down, so no more personal loans, no more credit cards (use cash!), and certainly no big purchases that require financing.
Look at the Numbers
When there’s a lot of money owed, it is easy to ignore it and never look at the numbers. Now is the time to get an accurate picture of all savings and checking accounts, and how much is owed, and to whom. Organize this in a way that is easy to read and refer back to.
Make a Budget
If this has not been done already, make a budget. How much is coming in per month, and how much is going out? Make sure to be thorough, this is intended to find out how much extra can be used to knock out that debt.
Create Extra Cash
Take a look at that budget and see where extra cash can be “created”. Where is there wasteful spending, such as restaurants or shopping, for example? Try to boost the number that will go to pay off debt, maybe by taking on an extra job or selling something valuable.
Emergency Fund
Next, create an emergency fund of at least $1,000. While paying off debt, there needs to be a safety net in case something comes up. Ideally, this is a month or two of expenses, but less will help just to get it started.
Pay More than the Minimums
Paying off the minimums on a loan will usually not bring down the principal at all, especially for credit cards. Start paying above and beyond what is required, this is the only way to reduce the total amount. All extra should go to the principal, not future interest.
Stick to the Plan
There are several great plans and strategies about how to pay off debt. Some suggest doing a calculation of which debts are owed the most interest, others suggest starting with the smallest and going from there. Whatever the plan is, stick to it and don’t deviate or give “rewards” for doing a good job. Consistency is key.
Snowball the Paid-Off Money
Once a particular debt has been paid off, take the money that was going to it before and roll that into another payment. For example, now a $250 bill that is paid off can go towards another $300 payment, which will pay off the bill twice as fast.
Settle Debts if Necessary
It could be that as this plan goes on, some expenses are just not manageable, such as medical expenses. If there is no wiggle room at all, go to the loan holder and try to settle for less. This is very common and could be a lifesaver.
Seek Professional Help
And if this does not work, perhaps a professional financial coach or accountant could help. This, of course, adds another expense, so try to do without first – the results could be surprising!
