Managing your debt effectively isn’t a simple operation, but don’t let that scare you. You’ve got this. You can defeat that mountain of debt. You just have to be disciplined about your spending. Organizing your funds is essential, as well. Are you ready to get on top of your debt?
1. Get Your Ducks in a Row
The first step in managing your finances and debt involves knowing how much money you owe and to whom you owe it. You may think this is obvious. However, it’s overwhelming without an easy-to-read spreadsheet right in front of you. A spreadsheet will allow you to stay organized and up-to-date on your bills.
Gather together what you already know. Include all of the pertinent information, such as the name of the creditor, your total debt with them, the minimum payment for each month, and the date that your bill is due. You’re less likely to miss a payment or pay late when everything’s organized. That’s essential since late payments can tank your credit score. After creating your spreadsheet, you need to check your credit to make sure there are no surprise debts that you’ve forgotten about over the years.
2. Create a Calendar
From your spreadsheet, you can go on to make a calendar that details all the due dates for your monthly bills. Given the importance of paying your bills on time every month, you don’t want to risk making a late payment. A calendar ensures that everything is right there in black and white. Even better, you can create alerts and reminders to pop up on your phone, tablet, or laptop each month. If you’re able to schedule automatic bill pay for any of your debts, go ahead and do that, as long as you’re reasonably sure that doing so won’t result in an overdraft in your account.
3. Create a Payment Schedule
Some debts need to be paid off sooner than others. For example, if any of your debts have gone into collections, then you need to pay them as quickly as possible. Anything that negatively affects your credit score is your highest priority.
When you’re ready to move on to credit cards and other debts, then you can put together a system. Some people choose to pour all of their extra money into debt with the highest interest rates. Others prefer to pay off their smallest balances first before moving onto larger amounts. Do what works best for your income. In general, however, it’s smart to pay off credit cards and other debts that have insanely high-interest rates since very little of the minimum payment goes toward the principal balance.
4. Always Pay the Minimum—At Least
Obviously, you have to pay the minimum payment on your various debts each month. Depending on the interest rate and the total balance, the minimum amount will vary. Whenever the opportunity presents itself, pay extra. You can either pay more when you make your payment or make a second payment in the same month, which will help to shrink your total. If even the minimum is too much, you might consider calling the creditor to discuss options, or you can look into debt forgiveness.
5. Create a Budget and Stick to It
Money might be tight as you begin to tackle your debt. The sacrifice is difficult, but it’s not impossible. Creating a monthly budget will ensure that you remain on track. You already know your debt. Add in other expenses, such as utility bills, gas, groceries, and other expenditures that you deal with regularly. Accounting for every penny might seem like a hassle, but it gives you the opportunity to see what you have left each month. Although you might need to skip out on some luxuries and entertainment, you can use your leftover funds to pay extra on your debt or put it into an emergency savings account.
6. Talk About It
Silence equals debt. When you’re having money problems or if you’re worried about debt, you have to talk about it or else it will spiral out of control and can even cause issues in your marriage. Not only does that mean that you need to talk to your partner about your financial situation, but it may also involve asking for outside help via a financial planner.
Above all else, don’t be ashamed. Nearly everyone deals with debt. You can get on top of this