Personal Finance 101: Rules for Managing High Amounts of Debt
Debt
If you are ready to get your finances under control in 2021, one of the most important things you can do is to tackle that mountain of debt that has accumulated.
Excessive consumer debt can damage your credit score and put you further behind in meeting your financial goals.
Large monthly credit payments can also chip away at your budget and possibly lead to even greater debt.
The following rules can help to get your debt under control.
Stop Charging
Put away your credit cards or get rid of them entirely. Keep one for emergencies if you can avoid overusing it.
Get in the habit of carrying cash for minor purchases, and write checks or use a debit card for costlier items.
As you watch your current credit balances begin to decline, you will be even more motivated to avoid charging the products and services that you need to your credit card.
Instead, pay for them with a debit card and keep track of your account balance to prevent overspending.
Shop Less
Avoid shopping as a leisure activity or stressbuster. Although it is fun and sometimes relaxing to window shop or pick up a few unneeded items on sale, you will end up spending money that you might not be able to afford until the credit debt balance is paid in full.
Instead, browse online wares or catalog offerings to find the best deal only when it is time to make a purchase that you need.
When your credit is paid off, you can use the money you once used to pay your credit card bill to shop for non-necessities again.
Consolidate Your Debt Balances
Discuss a debt consolidation loan with a financial institution that offers low interest rates and affordable payments on the total balance of your loans.
Combining your credit card balances owed will let you focus on just one monthly payment that will be easier to manage than three or four—or more—separate accounts.
Compare various loan options to get the best repayment terms to help you pay off the balance as quickly as possible.
Pay More Than the Minimum Payment
When you can, add a few extra dollars to your monthly credit account payment.
Chipping away at what you owe will reduce the balance more quickly and will reduce interest over the life of the loan.
In fact, you may be able to pay off the balance quicker than expected by applying even just a little more to the remaining principal each month.
Getting out of debt is manageable when you follow the basic rules of Personal Finance 101.
Shop less, avoid credit purchases, consolidate your debt, and pay more than minimum payments to enjoy financial freedom.
Category: Debt
