Debt is a serious threat to your financial security. And, while some debt might be necessary (think about your bond or a student loan), it is best to tackle debt as quickly and as efficiently as possible. Because the truth is, your debt isn’t going anywhere and it’s stopping you from enjoying your wealth and growing it.
Here are five top tips for tackling your debt:
1. Know your debt status
Before you can effectively deal with your debt, you need to know how much you owe and how much you can afford to pay off in what time frame. There is no point trying to pay off all your debt at once if it cripples your monthly budget and leaves you in a poor financial state.
2. Commit to a plan
Decide what you’re going to pay and how much and stick to your plan. Rank your debts in terms of overall amount and interest rates – pay off those debts with the highest interest rate first as, if you leave these too long, all you’ll probably be paying off for a very long time is interest. Pay off your debt regularly and timeously and you’ll start seeing it reduce sooner than you think.
3. Consolidate and reduce
Is it possible to consolidate your repayments? Or even your accounts? How many credit cards do you need? And what sort of service fees are you paying on them? Explore options to lower your interest rate – this will reduce the amount you must pay back. Talk to your bank about lowering the interest rate on your credit card, for example.
4. Reduce your monthly expenses
If you take time to put together an up-to-date budget (listing what you pay monthly for your lifestyle) and analyse your bills, you will find that you can probably reduce your monthly expenditure, especially when it comes to extras like entertainment and accessories. The result? More money for savings, investments, and insurance (the pillars of any good financial plan). Also, more money for debt repayment. While it might hurt to tighten your belt in the short term, it will pay off in the long term when you don’t have to service your debt.
5. Increase your income
Do you have time for a part-time job? Do you have a marketable skill, like baking or crafting? Can you sell it? Earn extra income and channel it towards debt repayment and savings. Don’t let it get swallowed up in your monthly budget. More money means more choices. And you might have fun too!
Debt can make you feel hopeless and, often, your money could have been employed in better, more productive ways. However, don’t give up. You can get on top of your debt and you can manage your money more effectively if you change how you treat your wealth and how you behave.
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