Debt is a problem that millions of people are forced to deal with. When managed correctly, it becomes a tool to obtain valuable things in life like a car, a home, or an education. It only becomes a “bad” thing when it is not dealt with responsibly and correctly. If you need help with debt management, these tips may help to accomplish your goal:
- Know who you owe – Keep track of your balances and due dates that you owe to all creditors. This is a great way to see the big picture and where you need to start. You can use a spreadsheet to easily track this information with the ability to change information quickly when the amounts decrease.
- Check accuracy – 1 in 5 American’s find mistakes on their credit report. Get your free annual credit report to check accuracy of debts and be in the know of all debts you owe and your credit score.
- Paying off your debt – smallest or highest interest first? – This is a great debate, and it depends on your situation. Paying off the highest interest rate first will usually get you to the end goal quicker, with more money saved in the end. However, when dealing with finances and especially debt, behavior and motivation can be the difference between failure and success, making the snowball method popular and often effective.
- Make at least the minimum payment – Paying more than the minimum payment or multiple payments is always better but, that’s not always possible. If you are making a minimum payment, that will save you the late payment fees and keep your the balance from growing any larger.
- Set your goal – A goal gives you the motivation you need to tackle issues like debt. Plan to have a certain percentage of your debt paid off within a given amount of time.
- Set a budget and a plan – A good family budget will inform you of the amount of money you can afford to pay on your debt each month. Having a budget is smart financial management and can keep you on track to ensure you don’t get back into out of control debt.