Debt can become a massive burden, draining many of time, energy, and hope. It can seem impossible to pay off, especially when one doesn’t know the right things to do. However, there is hope! Here are some tips and tricks that anyone can use to start getting out of credit card debt.
Take Stock of What You Have
Every marathon begins with a single step. First and foremost, look at your entire financial situation. To make the best plan, you must know the lay of the land. Gather all relevant receipts, bills, and debts, sit down, and take a long hard look. Make a list of the creditors, balance, monthly payment, interest rate, everything. When it comes time to make a plan, having this information will make it easier to zero in on which account should get paid-off first.
Plan Against Your Budget
Now its time to make a plan! Once the list of debts is in order, go ahead and look at your monthly budget and income. If you’ve never made a budget, don’t worry, it’s not that hard. It’s as simple as looking at your monthly spending, groceries, bills, fuel, entertainment costs, and so on, and comparing it to your monthly income. These days, there are even apps that take care of the work! Amazing apps like You Need A Budget (YNAB) or Mint that can help in managing a monthly budget.
Once your monthly budget is in order, figure out where paying off credit card debt fits in. Likely, spending in other categories, like eating out or entertainment, will need to come down. However, in the long run, sticking to a budget will let you head the dinner and the movies more often, in the future. “Stick to your new budget like glue. Be honest with yourself about your obligations,” Regina Blackwell, a certified budget counselor at Transformance, advises.
Start with Small Steps
With all that information in front of you, you can decide which debts to focus on first. You must remember: some obligations are more important to pay off first. Determining which to pay off first will help in getting one to a safe financial situation as soon as possible.
- Secured Debts – Focus on secured debts first. Since secured debts use assets as collateral, its crucial to pay these out as soon as possible. While not paying off a credit card bill will usually only result in a higher balance, not paying off a secured debt can result in the loss of a car, home, or entire business.
- Credit Card Debt – Next up, tackle credit card debt. There are tons of great tools online to help plan out payment and determine the amount of time it will take to pay off the entire debt. Search for “debt repayment calculator,” and you’ll discover tons of free online help.
- Student Loan Debt – Pay off your student loans last. Mainly because they’re considered “good debt” and are even tax-deductible! Still, don’t put them off if you don’t have to. The government can come after non-payers after a specific time, which could lead to legal action and even more fees.
Always Readjust
Not everyone can always afford to get a second job. However, if you do, or any part of your financial situation changes, always make sure to begin the process again at step one. Re-budget and re-evaluate with your new income.
Credit card debt can be scary, but you don’t have to face it alone. If you’re unsure how to begin, ask your financial advisor for help or bring a credit counselor into the game.
Sources: Credit Karma, Credit.Com