Do you have debt hanging over your head? Does it feel like a burden that you’re lugging around that you just can’t seem to get rid of? Student loans, credit cards, car payments, personal loans or any other type of debt can be a significant burden, and cost you tons of money in interest. If your debt burden is keeping you up at night, it’s not only robbing you off your sleep but also stressing you out.
The key to lessening stress caused by debt is having a plan to pay it off. But before you can come up with a major debt repayment plan, there are some small steps you need to complete first.
- MAKE A LIST OF ALL YOUR DEBTS
Ignoring your debt will never make it go away. So, as your first rescue measure, make a list of all the debt you have. Credit cards, personal loans, car loans, mortgage – everything. Make sure to write down the total balance that you owe, categorize it and you will clearly understand when you go back to it. For now, don’t focus on the interest rate or the minimum payment. This first step is meant for you to see the overall picture. It’s a way for you to overcome your fear, and accept your situation.
- STOP USING CREDIT CARDS, IMMEDIATELY!
Nothing makes the problem worse than adding more debt to an even bigger debt pile. Credit cards are usually our emergency options. Unknowingly, by using a credit card, you are actually increasing your debt burden further while you cannot afford it. “Pay for later” could be a dangerous problem that will stop you from focussing on getting rid of major debts and throwing you into an unnecessary spending mode. So, the best way for your to cut your debt is to refrain from using credit cards and use cash, to keep tabs on your spending.
- BUDGET YOUR LIFE/SPENDING
If you haven’t already, creating a budget is the most important thing you can do if you want to pay off debt. Why is creating a budget so important? It will tell you where you want your money to go, and how much extra you can afford to put towards paying off debt. Knowing how much you owe is crucial, but knowing how much you have is also important. Don’t worry about making this step complicated. Don’t get caught up in all of the little details. Create a bare-bones budget, and work on the details as you go. Just start.
Start by listing your expenses and your income. Do you have enough income to cover all of your necessary expenses? Do your expenses include your minimum debt payments? Any excess income can be used towards your debt payoff goals.
- CREATE AN EMERGENCY FUND
Tackling the debt you have now is important, but it’s also important to not add new debt. If you don’t have any money in the bank and an emergency does happen, how are you going to pay for it? You already got rid of your credit cards, right? Now, you need to create a buffer between you and your debt. Debt should never be your only option to take care of life necessities.
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