Manage your Personal Finances and Reduce Debt Effectively Using these Tips
Millions of people in the United States are swimming in debt, and they do not know how to pay them off. A recent survey shows that most Americans have an average of $17000 debts. Debts will give you sleepless nights. If you want to cut down your debts, follow these tips:
Know your creditors and how much you owe
If you want to live a debt-free life, the first thing is to make a list of your debts, the total amount of debts and the creditors. The due date of the debt should be listed too. If you have a credit report, it will be easier to confirm the debts indicated in the list. When you have the list in front of you, you will see a clear and better picture of your debts. You will be more aware of the situation at hand.
Never create the list then forget it. It is crucial to keep on checking the list from time to time. Experts say that the best time to check the list is when you are about to pay your bills. As the amount indicated keeps changing, make sure that you update the list periodically.
All your bills should be paid on time
People who pay their bills late find it hard to clear their debts since they are forced to pay a certain amount of late fee. This charge applies to all the payment that has been done late. If you make two late payments, the finance charges and interest rates will increase significantly.
When making the special list, you can opt to use the calendar system that is available on your computer. Your smartphone can come in handy when making this list too. Whenever you have made a payment, enter the details in the smartphone or computer and set the alarm for the next payment. If you happen to miss the payment, never wait for the next due date. Most of the lenders will have reported you to the credit bureau due to late payments.
Have a monthly bill payment calendar.
People who have a bill payment calendar will rarely make their payments late. This is the perfect way to figure out the bills you will need whenever you get money. Use the calendar to write every bill payment date and amount. The date of all your paycheck should be clearly stated on the pay bill calendar. Some people receive their salaries on the same date each month. In this case, they can use just one calendar. However, if you will receive your money on different dates of the month, create a pay bill calendar for all the months.
Make the minimum payment.
Sometimes, people can be faced with emergencies, forcing them to spend more than they expected. This should not prevent you from clearing your debts. When it is impossible to pay the required amount, it is crucial to make the minimal payment. This will not help you in the debt payment process. However, it will help you in keeping the account in a great condition and prevent the debt from growing.
People who miss payments find themselves in bigger financial problems. For most lending institutions, the account is taken by default. Moreover, the clients find it very hard to catch up in the future.
Choose the debts to pay off first.
It is essential to decide the debts you will settle first if you want to have peace of mind. Financial experts state that the credit card debts should be given the top priority because they will attract higher interest when compared to all the other debts. When paying the credit cards, give priority to the one that has the highest interest rate because it will cost you more money if ignored.
The debt list you have created will assist you in selecting the debt to clear. The list should rank the credit cards and the order they should be paid off.
Pay off any collections and charge-offs.
It is only possible to pay your debt according to your income. If you are currently experiencing limited funds and you still have to repay your debts, focus on keeping all your other accounts in their right standing. Never try to sacrifice your good accounts so that you can take care of the ones that have been negatively affected by your credit. Choose to pay the past due accounts when you are able to afford it.
Always remember that your creditors will be forced to continue their collection activities in your account until your account has been settled.
Use an emergency fund
If you do not have any savings, you will be forced to get more debts so that you can cover your emergency expenses. Having even the small emergency fund will go a long way in covering some of the emergency expenses when they arise.
The first step is creating an emergency fund. Make sure that you have at least $1000 for a start, and everything else will fall into place. Even with a small start, you will be able to create a bigger and better fund.
Halt your credit card spending
Are you serious about clearing your debts? Then it is crucial to remove all your credit cards from your handbag or wallet. Whenever you are going for shopping, leave these cards at home so that you are not tempted to spend more than you have. Don't be tempted by rewards that are offered to the people who shop using their credit cards. Unless you have your finances under control, never go shopping with your credit card.
Change your habits.
People get into debts because of their routines and daily habits. If you want to put an end to this mess, you have to change the bad spending habits. It is crucial to spend time thinking about how you will be suing your cash weekly, daily and monthly. You can adapt saving habits like carrying packed lunch to work instead of eating out in a restaurant. Buying lunch every day when you are in the office can be very costly.
Reward yourself for any significant milestones.
If you are thinking that paying off your loan is a form of punishment, then you will never be able to clear it. Set debt payoff goals, and when you reach them, reward yourself well. Keeping yourself motivated will ensure that all your realistic loans have been paid and that you have a clean record. However, you should only get a reasonable award so that you don't end up overspending. For instance, you can go for a weekend camping trip instead of taking a weeklong holiday.