As in most endeavors, formulating a plan is one of the best first steps you can take in order to tackle any goal and complete it successfully. The same is true even with paying down debt – a great debt plan will help you stay organized and focused to pay the debt off faster. To get on the fast track to debt freedom, read on for a few expert tips:
Evaluate Your Debt Situation
The first step is always the hardest, but in order to formulate an effective debt plan, it’s best to have all the information. Familiarize yourself with how much debt you actually owe – knowing how much you need to pay down will provide you with at least part of the picture. You’ll also want to take a look at your monthly cash flow. You can do this by gathering all your necessary monthly payables such as utility bills, food, gas, and insurance. Deduct the total from your income and you have a number that should be realistic and reliable enough to pay down your debt with.
Prioritize Your Debts and Order Them
Many personal finance experts agree that the best way to start paying down debt is by ordering them from smallest amount of debt to the largest, regardless of the interest rate. Clearing the smallest goals first can have a profound impact on your psyche that will serve as impetus to keep going. However, if you’d like to pay less in interest and save money, order your debts so that you start paying off the ones with the highest interest rates first. Take the portion of your income that you’ve allotted towards debt repayment as detailed above and apply it on top of the minimum balance required to pay off that first debt. Meanwhile, faithfully pay the minimum on all of your other debts until you clear that first debt.
Consider Debt Settlement
If you’re having trouble keeping track of what you owe, or paying your debts off on your own, you may want to consider debt settlement. A debt settlement company will do all the work for you: they will negotiate with creditors on your behalf in order to reduce the amount you need to pay. What’s more, debt settlement may help you save money. The debt settlement company will negotiate with your creditors so that you can be completely forgiven of your debt by only paying a portion of the total amount you owe.
Pay More than the Minimum
The most effective way to get your debt down is to pay more than the minimum. In order to do this, you’ll want to explore new ways to create income. You may want to put any financial windfalls that may occur towards reducing your debt. These include bonuses, raises, overtime pay, or cash gifts. Resist the urge to treat yourself — which may create or increase your debt — before you are able to pay everything off. You may also want to take a home inventory. Anything that’s still in great shape that you don’t use on the daily can be sold online or at a garage sale. Recycling also nets you some cash while helping the environment out. Finally, take advantage of promos and rewards on your credit cards, and survey rewards, and utilize the full power of couponing, which can help you save a lot on groceries.
To learn more about debt relief solutions and how to start living with financial freedom, contact CreditAssociates for a free consultation or use our Savings Calculator to see how much you could save.