Create a Budget

Creating a budget may seem obvious but it’s an important step to paying down your debt and a good place to start. Make sure to create a realistic budget that allows you to pay down your debt but also allows you to have some spending money. Cutting all extras out of your life is unrealistic and will just cause disappointment when you eventually break your budget.

Check Interest Rates

If you have multiple debts you are attempting to pay off check the interest rates. Make sure to make minimum payments, or a little bit more if you can, on all of them and then put any additional funds towards the debt with the highest interest. This will save you money in the long run.

Pay More Than the Minimum

When it comes to paying down debt you always want to try and pay off more than the minimum payment, so you actually are making a dent in your debt. In most situations your minimum payment will only cover the interest that has been gained on the debt if that. So, if you actually want to see your debt go down you need to start paying more than the minimum.  

Paying-Off-Debt

Think About Your Habits

Considering your spending habits is important to successful financial management. In doing this you will understand where you struggle to control your budget and also where you succeed. This will help you determine where you need to exercise a little more control to meet your goals of paying down your debt.

Automate Payments

Try and set up automatic payments for the debts you are paying off. This is beneficial for two reasons. First it will not allow you to miss making a payment and second, the money will not unintentionally be spent on other costs. You can also consider setting the payment date for the same day you normally get paid, this way it will seem similar to automatic deductions of your paycheck such as health insurance and retirement deductions.

What to do Next

Your next step is actually creating a debt repayment plan, which can get a little bit confusing, overwhelming, and frustrating. The goal normally with paying down debt is to get rid of it as fast as possible or faster than what is planned. For instance when considering federal college loans you are looking at a time frame of 10-30 years. Most of us want to get that debt gone in 10 years or less. To figure out your debt repayment plan look for debt repayment tools like Ready for Zero.

Ready for Zero is a free app and website that allows you to either link your debt accounts (credit cards, loans, etc.) or enter them in manual so there is no linking to your accounts and helps you create a repayment plan. Once you have entered your information you can change the date you want to be debt free by, or the monthly payment amount and the program will show you what your monthly payments need to be to achieve that. They also have some other great resources that will help you manage your debt. However, there are many other resources out there to help manage debt, find out which one is best for you. Share with us any tools and tips you have found useful!

 

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