The absolute worst part of debt is the stress that it can add to your life. Constant payments to manage your debt can have affects far beyond just your finances.
It makes sense that so many people dream of being debt free.
Of course, turning that dream into a reality is easier said than done.
There is over $13 trillion in household debt in America. This can seem insurmountable but if you take things one step at a time, you can be debt free sooner than you ever imagined.
1. Build a Complete Household Budget
Taking charge of your debt first requires you to build a complete financial picture. Going through the process of budgeting is a revealing process for many.
However, less than half of Americans actually create a monthly budget.
When you see where your money is going, you begin to see where you can reduce your expenses. Use this extra money to tackle debt more aggressively.
2. Focus on High Interest Debt First
When making a debt repayment strategy, start by taking on the high interest debt first. Of course, continue to make payments on other loans with set payment schedules.
High interest debt like credit cards and payday loans can quickly trap you in a cycle of making payments that only address interest charges without actually helping you become debt free.
Use any available funds to pay down high interest debt as fast as possible. Once this debt is paid off, you will be in a much better situation.
3. Consolidate High Interest Loans
Consolidating high interest loans into more manageable loans is a great strategy to get out of debt. By doing this, you can get an interest rate and repayment terms that are more favorable.
A lot of people struggling under the load of student loan debt may benefit from consolidation. Interest rates on many student loans rise after graduation and can suddenly make manageable loans a major cause of stress.
Using available services, you can compare student loan consolidation rates among various lenders to find the perfect loan for you. Once you have done the consolidation, you can use extra funds from your budget to focus on other forms of debt.
4. Cut Spending to Increase Payments
Reducing your spending will give you the freedom to tackle debt more quickly. This is much easier said than done but there are some useful strategies you can use to reduce your monthly spending.
Meal planning is a great way to cut spending at the grocery store. Plan your meals for the week, shop accordingly for the ingredients that you need, and avoid buying any extras.
Look for other ways to reduce spending. Shopping around for insurance, comparing cell phone plans, and even looking for deals on things like gym memberships can go a long way in reducing expenses and allowing you to take on your debt more aggressively.
This is a Battle
Becoming debt free is not something that happens overnight.
If you make the right decisions and commit to good financial habits, then you will make progress but it takes time.
Just remember that once this process is complete you will be free of debt and a lot of stress. You can do it!
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