To reliably get out of debt, you need a sustainable plan.
To start, follow this list, and we will get into more detail below.
Here is how to pay off your debts:
- Gather all your financial data
- Make a list of your income and debts
- Lower your interest rates if possible
- Pay more than required
- Earn more
- Spend less
- Create a budget
- Start over – until your debt is gone!
Keeping this list somewhere you can see it is ideal. You will be more likely to stick to the plan if you are frequently reminded about it. We will break down these steps for you to follow easily:
Gather all Your Financial Data
To get started, you want to know exactly what you are dealing with.
Here is what you need to collect to get the best picture of where you currently stand:
- Recent bill statements for all credit cards and loans (also student loans)
- Credit reports
- Credit score (to see what you are eligible for)
Make a List of Your Income and Debts
Now that you have the data, you should list everything out.
Here is what you need:
- Interest rates
- Minimum monthly payments
- The creditors’ names
Now, list what you need to pay to negate the debt’s balance within your determined time frame. Remember, you need to include recurring bills as well as groceries and other monthly expenses.
Be sure you know your monthly income from all sources. Use this amount as a baseline to work towards paying your debts, without skipping on your groceries and other bills.
Lower Your Interest Rates
The interest on your debt might make it seem like you will never get ahead. When you owe more money, the charged interest goes up – and then more is added the next month. You need to break from this cycle to get out of debt.
One way to start getting ahead is to get your interest rates lowered if you can. You can try to consolidate your student loans, get loans with lower interest rates, or transfer to a credit card with a lower rate. You also can call your credit card company and ask for a lower interest rate.
Pay More than Required
You should always try to pay more than the monthly payment on your loans and credit card bills. Always make sure that there are no prepayment penalties and that your additional payments are going to the principal, not the interest. It’s smart to begin by paying additional money to the cards or loans with the highest interest.
Earn More Money
Taking on a side job can help you save more money, even if you only do it for a short amount of time. You could consider freelancing, walking dogs, odd jobs, or trying out investment apps like Acorn. Every little bit helps when you are in debt.
Spend Less Money
Earning more and spending less is a great way to save for your debts. You do not need to make drastic cuts but eating at home more often or packing a lunch for work can help a lot.
Create a Budget
Your budget will show you how you should be spending your money. Use the number from your income and debts and use it to work towards a goal.
You can do this by:
- Total your payoff time frame for all credit cards
- Add in monthly payments on all debts
- The result will be your total monthly payment
Once you have that number, you will know if you can afford to pay the total monthly payment consistently. If you cannot, then you will want to contact your attorney for advice on what to do next.
Keep Going Until Your Debt is Gone!
Stick to tracking your spending and staying on budget. You might need to adjust or make changes but if you follow these tips, your debt will be paid off in a reasonable amount of time.
If you find that your monthly payments are far more than you can afford and your creditors are calling regularly, you might want to consider contacting Moseman Law Office. Attorney Heather Moseman is a bankruptcy attorney in Northeast Ohio who can help you make wise decisions on how to handle your debts. Contact us today!