There is no denying it; household debt is now a big problem in the country. According to the Federal Reserve Bank of New York total credit card debt continues climbing reaching an estimated $931 billion 2017. In 2018, U.S. consumer debt rose 2.9 percent to $3.893 trillion. Most of the debt includes auto loans, mortgages, credit card debt among others. The same report shows households with any kind of debt owe $133,568. Well, the numbers might not mean much until you examine the impact the burden of debt has on individuals and families. It is virtually impossible to access credit when in debt due to poor credit rating and this makes life harder.
If you have multiple debts to service, it is time you did something about it. Many families have sunk into poverty due to ballooning debt and to avoid such a terrible situation, you need a concrete strategy. Below are some tactics you can employ on your finances to ensure you repay your debt quickly.
Analyze your Debt and Create a Plan
It is a well-known fact that you can only manage what you know. If you visit any financial advisor, they will tell you to first assess your debt situation before trying any debt strategy. You have to list all your debt from the biggest to the smallest and beside every item, note down the interest date and due date. Most people stash the bills away without a second glance but this is the easiest way to bankruptcy. If you want to resolve your debt problem, get ready to face this unpleasant situation. The best strategy is to start with the debts that have a high-interest rate because they cost you more money. It is a simple step but one that also psyches you up on the tough road ahead.
Create a Tight Budget
Now that you have decided to face your debt problem, you need to start tightening the purse strings. A good idea is to bring on board every member of your house. You need to explain the situation and let everyone know this is not a permanent situation. Cost cutting is the easiest way to beat debt because every coin saved goes to debt repayment. When you have support from the rest of the family, it is easier for your debt strategy to work. Leverage free budget creation tools and see where you can save money.
Create an Emergency Savings Fund
Any financial advisor will emphasize the importance of an emergency fund as an important step in debt repayment. You see, emergencies are bound to arise and you don’t want to go back to the debt rut to resolve such issues. Before implementing a debt strategy, take some time to save money that you can use for emergencies. Most experts recommend at least $1,000 for any unexpected expenses or bills and this is a clever way of avoiding the debt trap.
Start Paying Debts on Time
Now your debt strategy is in place and you need to actualize it by repaying the minimum balances on time. If you have credit card debt for instance and it tops your list of debts, make sure more money goes to the card itself. At the same time, make sure you pay other debts and avoid falling back on any of them.
Try Balance Transfer
The competition for customers among the credit card companies has seen most of them launch products witha zero-interest balance transfer. It is a great opportunity if you have a debt on an old high-interest rate card which you feel you can repay in a few months. It is possible to move such debt to a new card and enjoy zero rates for several months. It is a great way to save hundreds on interest rates as long as you can repay the debt before the introductory interest rate expires.
Control Your Credit Card Spending
If you want to manage your debt, make sure you work on your credit card spending. It is time to take a huge step by leaving your cards at home. Avoid unnecessary purchases until your finances are under control. Paying for purchasesin cash according to financial experts is a great way of gaining financial discipline. You will remain conscious of your spending something that you can’t do with credit cards.
Try the Snowball Method
The snowball technique is one of the most popular in debt repayment and it entails repaying small credit card balances first. One reason it ranks highly among the debt strategies is the fact that it motivates household owners to keep repaying as they can see their efforts working. Once you repay debt on one card, move on to the other and so on using the cash freed from the already repaid debt. Don’t pocket what you have saved but instead plow it back to debt repayment and you will see the impact of the snowball method.
Among the debt repayment strategies, debt consolidation rates highly for many good reasons. In the simplest definition, debt consolidation entails buying a new large loan product to repay all your smaller debts. It is a strategy that gives you peace of mind and saves you money on multiple loan repayments. You can also negotiate better interest rates for the new loan product and you can manage your finances much more easily with a single loan repayment.
Refinance Your Mortgage
It is a bold step that allows you to consolidate all your debt into your mortgage. It lowers your monthly repayments, improves your credit score and reduces your debt repayments. Make sure you do the maths and check whether this option makes financial sense based on the amount of debt you owe and the benefits you get.
Pay More Than The Minimum Payment
It is the simplest trick in the debt repayment book. Whether you have credit card debt, personal loans, or student loans, one of the easiest ways to get out of the debt rut is by making more than the minimum monthly payment. You will save on interest and also speed up the loan repayment. This strategy if your loans don’t have prepayment penalties.
There you have it; repaying debt doesn’t have to be so hard after all. You just have to accept there is a problem, create a realisticbudget, readjust your spending and identify a debt management strategy best suited for you. Talking to a financial expert will also help a lot.