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You’re ready, you’re motivated and you’re eager to put your debt behind you. Great…but where do you start? Writing out a plan to eliminate debt focuses your intention, gives you benchmarks to achieve and keeps you accountable. Begin by listing your balances and interest rates. On a separate sheet, write down your monthly take-home pay and itemize all your essential bills like rent or mortgage, utilities, car payment, groceries, etc. Stop unnecessary spending, and cease the use of all your credit cards. Contact your credit card companies and request an interest rate reduction.
Once you have a snapshot of your income vs. expenses, then you will have a clearer picture of how much you can put toward your outstanding debt each month. Write down any ways you could increase your income and cut down on expenses. Start applying the extra money to the credit card with the highest interest rate, to get it paid off the soonest. When you do the math, you’ll see that making an extra payment every month or paying more than the minimum balance can make a big difference in the long run. Get more information about planning strategies below.
To best navigate how to get out of debt, you first have to understand how you got into debt. Credit card companies bank on the fact that you will maintain a high balance and make only minimum payments. While this is an ideal situation for them, it is a never-ending treadmill of interest for you. If you have multiple credit cards, this predicament can become overwhelming and leave you with high-interest debt that can take over a decade to pay off.
People get into debt for a multitude of reasons. The availability and ease of credit, while enticing, does very little to advance the financial wellness of most people. Managing debt means taking a serious look at your habits and identifying areas where change is necessary to get out from under the control of your creditors. Review the following links to learn more about credit card debt.
One way to tackle high-interest debt is through consolidation, which combines your multiple unsecured debts under one new credit source. This way of refinancing debt can save you in interest with a lower rate and a set payoff term. Depending on the amount of your debt, some consolidation means may be more beneficial.
If your debt load is under $5,000, you could consider transferring the balance to a 0% credit card, but beware of fees and the interest rate once the promotion expires. Personal loans that have a low, fixed interest rate and set term can also be used for debt consolidation. If you have a higher amount of debt, you could consider a home equity loan or mortgage refinance. If you’re not a homeowner, a debt relief program run by a not-for-profit organization may help you consolidate your debts and have one monthly program payment. The links below offer more information about debt consolidation methods.