Contemporary life makes avoiding debt a near impossibility for most people. Necessities are more expensive, emergencies arise, and health care costs are an ever-blossoming phenomenon. With that said, finding a better way to deal with debt is doable if you enact the following ideas.
Stop Charging
If you’re trying to find the best way to deal with debt, your first step should be to avoid incurring it on frivolities. Sure that $5,000 leather coat is a great buy in July at $500 because it’s from last year and nobody buys leather coats in summer. But if you don’t need it, it’s not a great buy at any price. You have to separate wants from needs to be successful here. For any of the following ideas to be successful, you must avoid digging the hole deeper.
Determine Exactly What You Owe
Knowing your obligations precisely, when they are due and what the minimum payments are is essential to managing them well. It’s next to impossible to create a budget without a handle on this information. Further, you can’t know what your exact financial situation is until you have a firm idea of how much money you owe vs. how much you make each month. With this information in hand, you can formulate an appropriate plan of attack.
Look For Ways to Make More Money
Regardless of your debt to income situation, making more money is always a good thing. It might take the form of a part-time job, taking on overtime, getting a raise, or starting some sort of business. Long story short, doing whatever you can to get more money into your monthly budget will help you pay debt down more quickly.
Sell Unused Items
A lot of people have gold mines in their closets, garages and storage spaces without even realizing it. If you have items in your possession that you haven’t touched within the past year, the odds are strong you won’t ever touch it again. Sell it off and use the proceeds to reduce your debt. Sites like Craigslist and eBay are ideal and hold the potential of bringing a lot more money than a garage sale.
Snowball Your Debt
If you’re paying as much as you can on all of your accounts each month, stop approaching them that way. Instead, list them in order from the one with the largest balance to the smallest. Make minimum payments on all but the lowest balance, then take all of the leftover money and apply it to that one along with its minimum payment. Continue each month until it’s paid off, then apply the same strategy to the next smallest one. Keep paying your debts in this fashion until they’re all cleared. Payments will get larger and larger as you work your way up the list, even while the balances are diminishing—because you stopped charging. (That last part is key by the way—you have to stop charging.)
Refinance Debt
If you have a mortgage, refinancing could bring down your interest rate. You might also consider getting a consolidation loan to pay off all of your high-interest debt and combine the payments into one. But run the numbers carefully to make sure you don’t wind up paying more overall.
Negotiate with Lenders
Contact your creditors and request interest rate decreases to help you repay your loans more quickly. Often, when they learn you’re experiencing financial difficulties, they will try to work with you to keep those payments coming in—even if at a trickle.
Consult a Professional
If you’re making no headway negotiating on your own and the debt is becoming unbearable, hire a company like Freedom Debt Relief to negotiate on your behalf. In a lot of cases, these firms can help you significantly reduce what you owe and get you out of debt faster. This includes forgiveness of a portion of the principal amount on most unsecured obligations.
Finding a better way to deal with debt is simply a matter of taking stock of your circumstances and determining the best way to approach them. These tips can be very helpful in that regard. Just make sure you avoid incurring debt again once you get things back on track.
