Stay on the Debt Reduction Track
It’s March – how are those New Year’s resolutions holding up? If your resolution was to get out of debt and you’re struggling, don’t fret. Here are some simple steps to help you get back on track to reducing and eliminating your debt.
Assess your financial situation.
The first step to debt reduction is assessing your financial situation. You did not get into debt overnight and you are not going to get out that quickly either. You will have a better chance of succeeding if you formulate a debt-reduction plan. Start with these questions: How much debt do you have? Is your amount of debt increasing or decreasing each month? Where is your money going? Evaluate your expenses and track where the money goes. Knowing what you’re spending money on will help you decide ways to cut some expenses. Create a budget and start sticking to it.
Before you can get out of debt, you must stop creating new debt. Put away the plastic and start paying cash for your purchases. Studies show that those who use credit cards for purchases compared to those who pay in cash spend about 20 percent more. People who use cash for purchases think more about their spending decisions.
Prioritize your debts.
Before you start throwing all the money you can toward paying off a particular credit card, personal loan, or medical bill, you should make sure you have enough money each month to stay current on your necessities. We all need power and water, so you should stay current with your utility bills. We all need a place to live, so you must stay current with your rent or mortgage payments. If you need a vehicle to get to work, then you must stay current with loan payments and maintenance.
If you find that you cannot afford all of your monthly necessities and make payments on your bills, then you must cut back on your spending. If you have cut your spending as much as you can, then work to get more income or speak with an attorney about bankruptcy options. Whatever you decide to do, start doing it immediately! The sooner you start, the sooner you will be finished.
Choose your method of paying off credit card, personal loan, or medical debts.
If you’re facing a mountain of these debts and you have figured out from your budget how much you can afford to pay on your debts, it’s important to adopt a strategy and create a timeline for reducing your debt.
A great credit card debt-reducing strategy is to start by paying off the one with the highest interest rate. Pay minimum payments on the other accounts, but focus all that you can on paying off the account with the highest interest rate first. When that account is paid off, add those payments to the payments you were already making on the next highest interest rate account. Keep whittling each account down, one by one, until you have paid them all off.
Another good method of reducing debt is to start by paying off the credit card with the smallest balance. This can provide you with a sense of accomplishment and then when that account is paid off, start adding those payments to the payments you were already making on the next largest balance. Keep doing this until you have them all paid off.
Track your progress and celebrate victories.
Eliminating your debt is challenging, but it is a very valuable and worthwhile exercise. It takes motivation and perseverance to stay on track. By tracking your progress, you can hold yourself accountable and see your accomplishments. Set reminders on your calendar and compare your balances from month-to-month.
Brackett & Strunk, PLLC can help you prioritize your monthly spending and organize a debt repayment plan so you can get your life back on track. They offer a FREE CONSULTATION! They will explain how debts are collected so you can better understand how much time you have to work on each account.
Because they help people dispute debts, negotiate settlements and/or file for bankruptcy relief, Brackett & Strunk, PLLC are more than just Knoxville bankruptcy lawyers. They can help you develop the right strategy that will meet your financial needs. Knowledge is power. Take control. We can help.