Debt is a part of our life in our society. It can be a stressful experience being in debt. Although sometimes debt is form due to unintended circumstances which make us overspending within our budget. But most of the debt are from our daily life like education fee, house and car loan or business expenses. Undue stress start to haunt you down and keeps you up at night when your debt become more and more.
Well managed debt become stepping stone that enables us to improve our life and get things accomplished. Otherwise, if you cannot manage your debt well, it become stumbling block and hinder our progress for better life.
To prevent financial status spiralling downwards, you need to learn how to manage debt more wisely to clear it off faster. Commit a healthy debt management habits as quickly as possible. Here are few steps to help you manage your debt.
Prioritize Higher Interest Debts
Understand and identifying all your debts. Lists your debts from highest interest rate to lowest. Pay off the most expensive interest debt first since the one is costing you the most money. It helps to save you from giving away tremendously expensive interest rates. Continue this method and focus on the second expensive debt after the most expensive debt is paid off. With this strategy, you will have left with your least expensive debt to pay down last.
Pay At Least The Minimum Payment
We are always being encourage to pay every payment or instalment promptly to avoid interest and penalty charges. But bear in mind if you cannot afford paying more, you must make at least the minimum payment. Although we all understand minimum payment does not help in paying off debts, but it keeps your debt from growing. Eventually your accounts could go into default when you miss your payments because it gets harder and harder to catch up.
Pay More with Excess Cash at Your Debt
It will be great if you able to pay more than the minimum or even better increase your regular repayments amounts. Besides that, make a lump sum repayment of your loan with extra money you can spare also put wind in your sails that enable you focus on clearing other debts. Throw any excess cash at your debt, the more cash you can put, the faster it will disappear.
Draw Up a Budget to Plan Your Expenses
Evaluate and analyse your expenses to create a realistic budget and stick on it. It is crucial to develop a budget to tracks your income and your expenses to getting out of debt. Balance the amount of your expenses and try to get more from your income to put into loan payment fund. You need to trim your expenses if the outgoing funds more than incoming funds. In addition, getting a second job or picking extra shift to increase your income. You need to apply all your extra income to debt repayment to pay down your debt aggressively.
No matter how hard the life is, don’t give up to get up of debt. It is important to have a plan to tackle the debt. Be ready to get on the path to financial freedom, start rationalising your budget and stay debt free.