Proper debt management methods are the best way to get out of a deep financial hole. However, learning said methods is not always easy due to the overwhelming nature of financial debt. From harassing calls from creditors to the mountain of bills facing you each month, it can be hard to even know where to start.
Put Together A Budget
This is the first place to start managing your debt, because without knowing how much is going out versus how much is coming in, you will continue to financially flail. Track all expenses for 30 days and notate how much actual income you receive. Particularly if you are self-employed or have your own business, don't estimate how much you think you will earn. Instead, record how much you actually do earn; being conservative is always best because you can do something with extra money, but it is much harder to make it with less money.
Determine How Much You Have To Pay Debts
If you subtract your monthly expenses from your monthly income and there is little to nothing left over, then it's time to start slashing the budget. Anything that is not essential to your daily survival has to go; in other words, anything that is not essential to clothing, feeding, housing and transporting you is not a necessary expense. Once you slash expenses, you can use the excess income to start paying down debts.
Tackle The Worst Bills First
Once you are prepared to pay off your debts, tackle the ones with the highest interest rates or the highest likelihood of adversely affecting your credit first. Higher interest rate credit cards accumulate more per month, so the bill gets higher faster. Pay this first and then move on to lower rate cards. The same applies to any accounts about to be charged off or reported as unpaid to the credit agencies; pay them off or at least set up a payment plan in lieu of credit report, if the company is willing to do so.
Increase Your Income and Stop Spending
If you have a secondary talent or hobby, parlay it into a side hustle that will bring in extra income each month. From freelance writing to babysitting to baking and more, there are numerous ways to get a side gig that ups your monthly income levels. Start small by catering to family and friends and then branch out to offer your products or services to other paying customers.
At the same time, reign in your spending. Write down everything you purchase so you can review your spending regularly. Take your time when you buy something and ask yourself if you really need it. The more you can increase the income coming in while reducing the amount going out, the quicker you can get your debt under control.
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