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Last updated on May 11th, 2019 at 11:32 am
This is a guest post by Patricia Sanders.
Debts can create havoc in your financial life; even a little bit of debt is as harmful as venom. You have to keep up your debt payments, otherwise, your credit score will suffer.
On the other hand, if you have a large amount of debt, you have to work more hard to pay off them. Don’t panic, the task of managing debts is not as daunting as you think.
By following proper strategies, you can manage your current debts and also avoid further debts.
The very first thing that you should do to get out of debt is budgeting. It will help you determine your affordability. To set a budget, you will have to list all of your income and expenditures and then decide how much you can spend and still stay within your limits. If needed, you will have to lower your expenditures by eliminating unnecessary expenses. Make sure you modify your budget time to time. If you do this, only then you will be able to set aside a certain amount every month, which can help you to keep up with the debt payments.
Credit cards are not free money; you have to pay the bills on time. Using the credit cards randomly and ignoring the bills can create serious credit card debt trouble. So, stop buying credit cards just to get credit card reward points and miles; these are nothing but marketing strategies. Credit card companies offer enticing credit card offers to attract consumers. Thus, use the credit cards once you know that you can afford the bill. If you don’t afford an item with cash, then you should avoid buying the item at all. It is better to save money instead of using credit cards. Use the cash that you have in your hand to buy items that you need. This will help you to lower the expenditures and debt level.
You should try to pay off your debts as early as possible. The longer time you will take to pay off your debts, the more money you will lose on the interest rate. To pay off your existing debts, you have to follow the right debt repayment strategy.
Some strategies are as follows: –
If you have multiple debts with different interest rates, then follow the debt avalanche method. You just need to arrange the debts from higher interest rate to smallest. After that start making larger payments to the higher interest rate debt while paying the minimum for the rest of the debts. This will help you to pay off the most costly debt first. Once you pay off the higher interest rate debt, target the second highest interest rate debt and start making larger payments. This method will help you to save money on interest and get out of all the debt sooner.
You can also take out a consolidation loan to pay off all your current debts. However, you should make payments on the new loan regularly.
Considering professional debt relief option is another great option to get out of debt. If you are too messed up with your debts, then go for professional debt relief (Debt settlement or debt management) to avoid legal hassle. Ignoring the debts can force you to file bankruptcy, which can take a toll on your credit score. Apart from these strategies, you can follow debt snowball method or consider balance transfer method to pay off your debts. Remember, the key is, you have to start working on debt repayment goal proactively. To do so, you have to save more. How can you save more to make debt repayments?
To save more, you have to revisit your current budget to cut down extra expenses. For example, gym membership, monthly subscriptions, eating out, and unnecessary shopping are a no-no when you have to save more to get out of debt.
Another important strategy that can help you to save more is frugality. Adopting frugal life doesn’t mean depriving yourself. Frugality means strategical buys to cut down junk expenditures. It will help you to maintain the fine line between your needs and wants. Once you start living a frugal life, you will be able to save more to get out of your current debts and avoid future debts. – Do a part time job You should try to boost your net worth by doing a part-time job. Go online to get ample of openings to earn money by doing freelance work. The extra money that you will earn help you to make debts payments.
Well, managing financial emergencies plays a vital role in living a debt-free life. You have to be prepared for surprising expenses that come in the form of illness, job loss, accident, and unemployment. If you are not ready to manage an emergency, you will have to incur debts to get out of the situation. So, to avoid surprising debts, you have to be ready with enough fund in your hand.
You should start saving money into an emergency fund as soon as you start your professional career.
Try to at least save 3-6 months of savings in the account to manage any emergency in future.
Put the money that you are able to save from your everyday expenses into the emergency fund. You can save the money in a savings account too.
If you have enough savings in the emergency fund, you need not borrow money from others. This will help you stay away from future debt.
Remember, you can’t do all the task by yourself. If you are in too much debt, then you have to take other’s help to get out of it.
For example, you can rent your house to earn extra money to pay off your debts. Ask your parents to give you shelter for the time being. You can also ask your friend for a personal loan to avoid costly interest rate on loans available in the market.
Also, by following proper strategies you can manage debts and financial emergencies.
Disclaimer: Remember the information you read here does not represent advice. Any ideas or suggestions are just that and may not work for you. Read the full disclaimer here.
Looking After Your Pennies is an eco-friendly personal finance blog written and managed by Charlotte Jessop.
I write on a variety of topics including frugal lifestyle, eco-friendly living, money making ideas and generally how to make your money go further.
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