Debt Management Tips-Crack the Code to Financial Freedom
Written by Debtfree on March 6, 2018
Maxed out your credit card? Don’t have money to make your credit card payments? Worried about your ever-increasing debt? If yes, then it’s time to do some thinking and take control of your debt! Remember if you don’t do it now, you’ll be on the path to bankruptcy in no time and that you definitely don’t want that! Declaring bankruptcy can damage your credit score badly, lower your creditworthiness and what’s worse is the fact that it stays on your credit report for as long as 10 years. So, this is the right time to get your acts right and take charge of your finances before it’s too late.
Now that we’ve got you thinking, let’s take a look at what you need to do to get your finances under control:
1. Review Your Financial Situation for Reality Check
You know that you are in a mess but how big is it that is what you need to be accurate about to strategize your way to financial freedom. And for that you’ll need to review your financial situation. This way you can learn how grim is your situation and assess your financial standing. The best way to go about is to get your credit report. Review it carefully. Your credit report will provide your credit score and detailed information on how you’ve messed up, such as late payments and too many loans.
2. Prioritize Your Debts
The next step is to prioritize your debts. This is where you’ll need to demonstrate your debt management and budget skills. By prioritizing your debts you’ll be able to tackle and manage them wisely. This will help you figure and sort out debts you need to pay off and deal with first. Make a list to get started. As a word of advice, pay off the most expensive debts first. Sort credit card interest rates from highest to lowest and then try to pay of the card with the highest interest rate first. Remember failing to pay dues on credit cards with high interest will do you more damage as the late payment penalty will be higher. Also by paying off credit cards with high interest rate first; you can make big savings that otherwise you will have to lose due to late payment charges. Make sense?
3. Take Advantage of Balance Transfer
If you have a high interest credit card with a balance which you are very confident that you can pay off in a few months time, then move the debt to a card that offers a zero interest balance transfer. Do it carefully. This can help you save hundreds of dollars on interest. But remember you need to pay off your debt before the balance transfer expires or you’ll hit with a much higher interest rate.
4. Identify Your Monthly Expenses
Next step to take control of your finances is to identify your monthly expenses. This is needed to track down your spending, identify your monthly expenditures and see where your money goes. A good understanding of your spending will help you cut down on unnecessary expenses and spend your money wisely.
5.Spend Money Wisely
You can never become debt free if you continue to swipe your credit card on everything you fall in love with at the store. Remember that is what got you in this situation in the first place and exploded your debt. To manage your finances it you need to make sure that you only spend on things that are important. Saving money and cutting down on expenses is the key.
6.Choose to Pay With Cash Rather Than Credit- Leave Your Cards at Home
It’s said old habits die hard, therefore if you have the habit of buying things on credit and swiping your card wherever you go, it’s definitely going to be a challenge for you to overcome this habit! However, we know just the way to help you get rid of buying things on credit, leave your credit cards at home. Prefer to carry hard cash rather than plastic money.
When you have cash in hand, you’ll learn to be careful about your spending and besides you will not be able to buy things that are too pricey with the limited cash you have in hand. In this way, you will learn to resist temptations and impulsive buying. In addition to this, you’ll also learn to pay with cash rather than credit. This will allow you to minimize unnecessary expenditures and manage debt successfully.
7.Set Debt Repayment Goals
To gauge your success, it is vital to set your debt repayment goals. When establishing these, it is important to keep realistic targets. A lot of people set themselves up for failure because they keep farfetched goals and deprive themselves of even little joys of life in the quest of swimming out of debt. Depriving oneself completely, results in nothing but failure. You eventually cave in, lose control and then overspend.
It’s important to keep small and realistic goals to keep yourself motivated. Don’t make it look like punishment, sacrifice and guilt. Set milestones to measure your progress. Learn to reward yourself when you reach your milestones. For example a if you reduce your credit card debt from $8,000 to $4,000 in 2 months, you can give yourself a good reward for that, more than a pat on the back. A good reward can be a weeklong vacation or a dinner at a fancy five star restaurant where you’ve been craving to dine.