Do your finances keep you up at night? Are you tired of creditors calling? Living in debt is stressful and directly affects your quality of life. Changing your behaviors to overcome debt might seem hard at first, but once you begin budgeting, you’ll find paying it off is easier than you thought.
Keeping a meticulous budget will not only help you save for the future, but it will also help you eliminate the debt you owe now. So, how should you start?
Open the spreadsheet. Of course, you don’t have to use a spreadsheet. There are plenty of websites and budgeting apps available that can help you simplify the process. But whatever you work with, start by writing down your monthly income. Next, you’ll want to include all your monthly expenses, including mortgage, rent, auto payments, insurance, utilities, phone, internet, cable, groceries, childcare, and transportation. Dining, travel, memberships, and any other miscellaneous expenses should also be included in your budget. Now that you have a good overview of your spending, it’s time to move on to the debt budget.
Choose your method of attack. This is the part of your budget where you’ll work out how you’re going to pay off your debt. First, make sure to set aside enough money in your budget each month to pay the minimum on any credit cards or debt you owe. There are a couple of strategies that financial experts advise, including the debt avalanche. In this method, you would pay off the loan with the largest interest first. For those who want more immediate results, the snowball method is when you pay off the smallest debt first. Once that’s paid off, you direct the money you were paying toward that and add it to the amount you’re already paying on the next smallest debt. By more quickly paying off one debt, you’ll feel incentivized to keep on the path to a less debt-filled life.
Don’t stop budgeting. Even though you may be following your budget successfully, continue to look for ways to cut monthly expenses. That way, you can use the extra money toward your debt. Maybe that means eating out less or finding more inexpensive forms of recreation, or it could even be canceling a cable service you know you don’t really need. Whatever you find, the more expenses you can cut the faster you’ll pay off your debt.
Still need help? Look into a debt management plan. Don’t ever be too proud to ask for help, especially when it comes to debt. Millions of people in the U.S. also suffer from debt. That’s why even if you’ve done the above steps and you find you’re still struggling, look into credit counseling. If you qualify for a debt management plan, your counselor will work with your lenders to consolidate your loans into one affordable monthly payment that you’ll pay over three to five years until your debt is paid off.
Whether you use the snowball method or enroll in a debt management plan, paying off debt is very achievable. Don’t wait. Get started today and make your way toward greater financial freedom.