If you will allow yourself, your debt can be quite easily a spiral and before you even noticed it, you will be buried into a pile of debts from your credit cards and loans.
It is a dangerous trap which has taken a lot of people who have high hopes that they will pay all their debts one day.
To prevent yourself from being indebted forever in your life, you should check out some of the most sensible and strong debt management strategies that you can use in managing to get out in front of debts before it will become a serious and overwhelming problem.
- Which one is good debt and bad debt? – You should determine which of these your debts are categorized. Bad debt refers to any debt which costs more than the returns which will be generated by the borrowed funds while these are the debts that you want to focus on in clearing the first and foremost. This is an example of good debt is a mortgage, as you are utilizing that loan in buying a long-term purchase for yourself such as a house, or a property. The best example of bad debt would be a credit card debt because it could not only destroy your credit rating, but it will also accrue more interest the longer you leave it at all.
- You should rank your bad debts– Once you successfully sorted the good debts from the bad debts, you should rank your debts and create it as your mission in paying off the most burdened debts first because the higher the interest, the higher up the list it should be going on. Try not to focus on the entire balance, and instead focus on the interest first. At this point, you can switch current accounts to a bank which can help you with bad credit scores and debt management.
- Create a plan– Creating a plan which can make you a concerted effort in sticking to is an incredibly important move in clearing your debts. You should not think about spreading your bad debts at all, but instead, you should focus on paying off your worst debts first and then rinse and repeat it until all of your bad debts are already cleared. Then, you can move onto the good debts.
- Practice paying twice a month– Whilst it can be a tempting way to pay all of your debts for once in a month; if you change up your payment plan and make it a bi-weekly maybe then you can clear your debts twice as fast and this will also force you to manage your expenditures effectively. Even if you cannot afford to pay twice a week, it is still worth to split your payments as it can be very daunting for you in facing a substantial sum at every end of the month, so your $9000 loan can be paid easily after all.
- Chip away your debt one step at a time– There will be a time in your life where you are free of debt. So, if you have extra money, you should save it for the next payment of your debt.
The abovementioned steps can be your guide in the right direction in dealing with your financial responsibilities, specifically your debts knowing that having debts from your preferred financial institution is a huge responsibility and not following any proper process in dealing with it may result to financial catastrophe.