Debts can be challenging to handle, especially if you have poor financial management skills. While many are good and responsible at managing, some just aren’t cut out to efficiently deal with debts. The challenge is making sure you have enough money to provide for debt payments as well as to make ends meet. Not only that, but you also need to learn how to prioritize your debts to prevent any more financial problems.
Taking control of your debts doesn’t need to be that difficult. Lucky for you, there are easy steps you can apply to effectively manage your debts such as the following:
Develop a Budget
Creating a budget is the first step in solving your debt problem. You can take advantage of personal finance apps and an online calculator to help you come up with a file that includes all of your monthly expenses (debts, other bills, etc.) and income. Moreover, once you have created a budget with all of your debts listed, you can then scrutinize it and see which categories you can cut costs.
Pay More Than The Minimum Balance
If you want to make your credit card debts a little bit more manageable, it will help if you pay more than the minimum balance per month. On the other hand, if you pay just the minimum, it will most likely prolong your debt payoff strategy. Moreover, if your minimum payment is about £150, try doubling it or paying off even more.
Make Use Of Balance Transfers
Suppose you have a high-interest credit card balance you can easily pay off in a few months. It would be best to move the debt to another card to provide you with a zero-interest rate balance transfer. However, it is vital to know that you will need to pay off the said debt before the zero-interest-rate balance transfer expires.
If you fail to do so, you might get hit with an even higher interest rate than before. On the other hand, if you do it, you can certainly save a lot in interest.
Suspend Your Credit Card Spending
If you want to stop accumulating more debt, it will help to leave your credit cards behind for a while. Yes, you can earn rewards and cash backs every time you use your credit card. However, if you don’t have your debts under control yet, it would be better to stop spending your credit cards until you have finally learned to manage your debts.
Delete Your Credit Card Information From Online Stores
If you are fond of online shopping, there is a big chance that you stored your credit card information on the app or website. Doing so will make your checkout process easier. However, it will also make it easier for online shop apps or websites to charge for things you don’t need. That is why you should delete your credit card information from online stores to be safe.
Change Your Spending Habits
Your habits are one of the reasons why you are struggling in managing your debts right now. You will need to spend some time with yourself and evaluate how you spend money. Did you really need that latte? Do you really have to eat at a restaurant two times a week? These are just some of the questions you might have to consider to help change your spending habits and eventually learn how to manage your debts.
The following are some of the debt repayment strategies you should know about:
Debt Snowball Method
Using this method, you will need to prioritize the debts with the smallest balance. Suppose you have a credit card with a balance of £300 and another with £2,000. You will need to make minimum payments on both and add an extra to the lowest balance to pay it off faster.
Debt Avalanche Method
When it comes to the debt avalanche method, you will need to prioritize the debts with the highest interest rates. Once you pay that debt first, you can then proceed to pay off the second-highest interest rate. However, it is essential to know that you should make minimum payments to all your debts; you will just need to add extra to the one you gave priority and pay it off faster.
You can get consolidation loans for bad credit. This strategy involves combining all of your debts into one. One of the most common ways to do this is to take out a balance transfer credit card or a personal loan and then use that to pay off all of your debts. If you choose debt consolidation, you will have only one monthly payment for all debts. This means the odds of missing your due date will be reduced.
To Wrap It Up
When you have debt, you will need to learn how to manage it effectively. If you fail to do so, you will surely end up in deeper debt. This is because your debt’s interest rates will continue to accumulate no matter what. Not only that, but you might also be charged with fees for late payments. Once you take control, it will make it much easier to start making a dent in those debts!
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.