Dealing with out of control debt is one of the most stressful experiences in life. It is the type of stress that keeps you awake at night and prevents you from enjoying life. Luckily, there are ways to get debt under control, but it takes some effort. If you are facing seemingly insurmountable debt and you fear a financial disaster is lurking just around the corner, these steps could help you get back on track. Likewise, if you have already hit a financial wall, the changes listed below will help you correct your mistakes and rebuild your financial future.
Know What You Owe
Begin by getting a big picture look at your situation. Many people facing major debt do not even know where they stand. Make a list of all of your debts, their amounts, and their monthly due dates. Also note the interest rate on each debt and whether the debt is something that could be paid off in months, one year, two years, or longer. For instance, a recent computer purchase could be paid off in a few months, while a student loan would likely take years.
If you have a debt on the list that you could pay off within one to three months, put all your excess money toward it. Getting this “quick win” can motivate you to continue with a debt management plan. Your success will make you feel better about your situation and eliminate one entire bill from the monthly roster.
Determine which of your debts has the highest interest rate. Aside from the quick pay-off, the highest interest rate debt should be your first priority for pay off. The faster you pay it off the more money you have to put toward other debts. Once the highest interest debt is paid off, move on to the second highest and so on.
You can also try to negotiate better terms on your high interest rate debt. Some lenders are willing to work with you if it means they can count on a payment every month. If you are able to get your all of your interest rates in the single digit range, you stand to save thousands of dollars each year.
You might also consider consolidating debt. If you currently have two credit cards and one has a lower interest rate, move the balance on the higher rate card to the one with the lower rate. This can be tricky because there might be balance transfer fees and you might not have enough credit available to combine the debts. However, it can help you feel more organized, reduce what you are paying out of pocket by several hundred dollars each month, and save you money on interest in the long run.
Create Strict Budget and Stick to It
Now that you have your debt sorted out, you need to create a strict budget that puts as much money as possible each month toward paying down debts. This means putting some things on hold in your life, but in the long run, it will give you financial freedom. It also helps you become a better risk to lenders, so you are more likely to be approved for loans down the road. For more tips on creating a budget, visit Cnn’s Money Page
This plan is ideal for those who are just on the edge of major financial problems, but it can still help if your debt has spun completely out of control.
If you are scared your debt has become a monster you can no longer control, we can help. Contact the Law Offices of Robert M. Geller at 813.254.5696 to speak with someone about debt and money management.