5 Essential Debt Management Tips
Whether you’ve accumulated a little or a lot of debt, consider yourself among the majority. We all use credit cards or have taken out loans for varying reasons. If you’ve bought a house or a car, you likely have a monthly mortgage or car payment along with one or more credit card payments for smaller purchases. For many of us, reducing this debt is an uphill battle. So let’s take a look at some ways you can start climbing the hill and lowering your debt.
Review Expenses & Develop Budget:
Before you do anything, you need to know where you stand. A good way to do start is looking at your bank statement to calculate how much you currently pay for your mortgage, car, credit cards and personal expenses versus how much income you have each month. Now you are organized and can develop a plan to manage your debt.
What Can You Go Without:
An easy step is to look at your expenses and evaluate if you can reduce or eliminate anything based on needs and wants. For example, do you need a premium cable package or are you paying for a membership that you don’t use? These will likely make smaller dents, but, if added up, can free up some money to put toward paying off your debt.
Change Your Spending Habits:
Are you an impulse spender? Do you find yourself wandering off the list at the store and buying extras that you don’t need? Do you shop online often? Online shopping makes it all too easy to spend money without ever leaving your house. This requires some discipline, but restrict yourself to only those items that you really need and only go outside of that on occasion.
Request to Lower Your Interest Rate:
Call your credit card company (ideally before you start falling behind) and ask if your interest rate can be lowered. This may be an uncomfortable call for some, but you’d be surprised to learn that many credit card companies are willing to work with you, especially if you are still in good standing. You can also consult a credit counselor to do this on your behalf.
Combine & Transfer:
There are some instances where you can combine multiple loans into one. A common example is student loans. There’s a Federal Loan program that can help with this (see details here: ). For credit cards, you can transfer balances from a higher to lower rate card, or to a 0% promotional card if you feel you can pay off the balance during the introductory period.
Just knowing what your expenses are can significantly help you manage your debt. Consider it as your guide to determine what strategies will work best for you. For some, it might only require getting rid of unnecessary expenses and changing spending habits. For others, it may require much more than that. But with some determination and a solid plan of attack, you’ll set yourself up for success.