Get helpful ideas for escaping mounting debt burdens.
Are you facing an ever-growing debt burden? Don’t panic. So long as you have a dependable income, you can formulate a plan for paying off your debt using some of these 5 vital debt management tips.
Make a Budget
Obviously, there is no way you are ever going to climb out of debt if you continue to spend more than you bring in. Making a detailed budget and sticking to it will help. Your budget should account for all your living expenses, provide for payments on your existing debts, and ideally will include some money to set aside for a rainy day.
Prioritize Your Debts
If you have multiple different debt accounts, you need to take a careful look at all of them and decide which are the most important to pay off first. For example, if you have two credit cards with similar balances, you would want to pay off the one with the higher APR first as this will save you money on interest. If you have to choose between paying an unsecured debt like a credit card or a secured debt like a car loan, you would probably want to choose the secured debt to avoid having your property repossessed.
Get Out of High Interest Accounts
While it is true that most people should not take on any new debt if they are already carrying a serious debt load, this is not a hard and fast rule. Sometimes it is beneficial to open new accounts. For example, maybe you have received a promotion for 0% interest on a new credit card for the first twelve months. You could save a lot of money by transferring a debt from a high-interest account to this new zero-interest account. Just make sure you can repay that new account before the promotional period expires! You should also consider debt consolidation as a means of getting rid of high-interest accounts.
Make Payments on Time
There are few things more frustrating than making good progress on your debts, only to make one small mistake and get slammed with a late fee. If the late payment happened because your bank account was overdrawn you’ll face a double dose of fees. These kinds of penalties can really add up and hinder your efforts to pay down your debt on schedule.
Admit When You’re Overwhelmed
Finally, one of the most important tips for debt management is to understand when you are overwhelmed and admit it. There may reach a point in your indebtedness where your balances are growing faster than you can pay them down, or when your credit is so destroyed that it is no longer worth trying to protect. When you reach this point, you can and should consider bankruptcy.
Depending on the kinds of debts that you have, your income, and your assets, you may be able to choose between a Chapter 7 and a Chapter 13 bankruptcy to help wipe your slate clean and provide a fresh financial start. Consult with a skilled bankruptcy attorney to learn more about your options.
