The Ins and Outs of Debt Management
Debt is an integral part of most Americans’ lives. In fact, studies suggest a majority of Americans will die with debt to their name. Even having a tiny bit of debt requires vigilance to keep it from growing into something larger and more sinister – and with interest rates for credit cards commonly reaching over 20%, you better believe this can happen.
Having a large amount of debt requires foresight into the future of your finances, and in turn additional planning. Juggling a job, monthly debt payments, and the rest of your life can be tricky, but with a few tips, you can make it as painless as possible.
Know How Much You Owe and Who Is Getting It
You should lay out all the information pertaining to your debts in front of you. This will give you an idea of the exact nature of your debts and impending payments. Once you create this layout, refer to it every now and then to make sure you haven’t forgotten anything and are staying on track. It can be easy to forget about payments, especially if you have more than one creditor. As your amounts decrease, update the figures. Using a simple and free tool like Google Calendar can be of great use to you.
The money you borrow for school can mean a bright and secure future with little to worry about in the way of money. But for many, coming up with the funds to pay off student loans can seem like a dreadful Sisyphean task. The data on average costs of tuition don’t exactly bring peace of mind, either. Information collected by Collegeboard shows rates increasing seemingly without boundary.
Don’t assume that the first option you find is the best one in regard to student loans. Instead, take the time to compare student loan refinancing to see what payment method you can manage the best. You also don’t have to worry about your credit score being affected for comparing prices.
Decide Who To Pay Off First
Have a payment strategy to determine which debts to pay off first. Usually paying off credit cards first makes the most sense because they often slam you hard with a big interest rate if you fail to do so. Suddenly, instead of owing $1,000, you owe the company $1,200. This can make a bad situation dramatically worse.
A different strategy might involve paying off the debts with the lowest balances first. This way, you can trim the number of lenders in your life down to the minimum, and keep track of everything more easily.
If you have several debts that are manageable but you would like to simplify further, consolidating them might be a good idea. This involves taking out a loan to pay off several debts, combining them all into one large debt. This strategy often comes with a lower interest or monthly rate.
While this certainly doesn’t ameliorate debts, it can make it far simpler to manage and lighten the financial strain in the interim. This is recommended for people with outstanding debts with multiple creditors that amount to $10,000 or greater. There’s also a chance that it could confer tax benefits for eligible situations.
Create An Emergency Fund
Always have an amount set aside that you only dip into in the case of an absolute emergency. You will thank yourself in the event that you get into an accident or another time-sensitive cash bind. Start with a small and manageable goal, like $1,000 for example. Over time, you can double it and so on. In the end, you want to have approximately half a year’s worth of living expenses set aside for an emergency.
Having this fun will prevent you from needing to take on an additional debt if you find yourself in a crunch in the precarious time that you are paying off other debts. The last thing you want is an expensive medical bill while in the midst of paying off college tuition.
Create A Monthly Budget
At the beginning of the month, create a budget for all your expenses and pending payments. You should plan far enough ahead so you can take corrective action in case things are not lining up the way they should.
This will likely require a period of fine-tuning your expenses, especially if this is not something you have done before. This is a good thing because it will help calibrate your income and living expenses. You might realize that the grocery store you go to is a little more expensive than a different one down the street, or that your habit of going to happy hour every Wednesday is running you into trouble. It’s better to confront these problems head-on than deluding yourself into thinking they don’t exist.
Explore Different Sources of Income
One obvious but perhaps overlooked method of alleviating financial stress is bringing in more money. Unless you are working every waking hour of the week, there are likely some opportunities to put some more cash in your pocket that you never even thought about.
The power of smartphones grants the ability to make money to nearly anyone with a car through Lyft and Uber. Apps open up the possibility for all kinds of different revenue sources, and best of all, allow you to create your own hours.