Debt is relatively common in the United States. For example, most of us have credit card debt, personal loans, student tuition/loans, or car loans. The good news is that some types of debt can earn you money, but you need to have good-debt management skills and you should be prepared for unexpected events. Here are some ways to help you manage your debt:
#1 - List Your Debt
The first thing you should do is come up with a list of all your debts, including (but not limited to) credit cards, personal loans, student tuition and loans, car loans, and mortgages.
It’s also a good idea to categorize your debt, especially if you have a lot of it. This can help you focus on paying one type of debt at a time, instead of just paying them all back together, as well as tracking how much you owe and where. This is called debt stacking and there are several free calculators online that can help you strategize the best way to pay them off.
#2 - Keep Track of Your Debt
Keeping track of your debt is always a good idea. Being mindful of what you owe helps you create a budget and stick to it. Many of today’s financial tracking software programs have budgeting tools incorporated in them. You may want to use a spreadsheet such as Excel and create your own.
#3 - Develop a Debt Repayment Plan
The next step is to calculate how much you can comfortably pay each month, while still covering your regular bills and other expenses.
Once you set a target, you can develop a plan or strategy to repay your debt. You can use a debt-repayment calculator to show you how much you need to repay each month to eliminate your debt. This can also help you save a lot of money over the long run. For example, if you have a personal loan with a 5% interest rate and manage to pay off the debt within five years, you will save yourself over $10,000. There are several free calculators available online that can help you to best determine how to attach your debt.
#4 - Consider Debt Consolidation
If you have several loans, credit cards, and other various types of debt, it can be hard to keep track of them. One way to focus and keep track of repayment is to consolidate it into a single loan. This is usually done by grouping everything into a home loan or consolidating your credit card debt into a personal loan. This can help you save on the interest rates and increase your chances of paying off your debt faster. Just make sure you don’t run up consumer debt again after doing so.
On the other hand, if you have a lot of debt, you may want to speak to a financial advisor or a financial planner instead. They can help you develop strategies to pay off your debt and help you get the most out of your debt.
#5 - Don’t Take On Any New Debt
If you have a lot of debt, you shouldn’t take on more. It may feel tempting to take out a loan, especially if you are taking a loan out to repay a debt you already have, but unless you have a plan to consolidate your debt, you should reconsider. It’s easier to focus on one debt at a time.
As you can tell, there are a lot of ways that you can manage your debt. The key is to focus on one type of debt and then pay off everything slowly. As long as you commit to paying on time, you won’t have any problems.
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