How to Simplify Debt
The basics of sticking to your budget seem so easy on paper: just calculate how much money you bring in and deduct the money you spend. If things are so simple, how come the average American household has accumulated $21,000 in debt?
Before you think about adding your next car loan or mortgage to that pile, you should first see what you’re able to afford and figure out how to improve your situation.
One of the first debt relief options you have is to consolidate your accounts so that you’re only paying down one creditor. This simplifies debt and saves money on your monthly payments, which may vary depending on the size of your accounts. Without debt consolidation, your money gets spread among many creditors making only the minimum payment. With consolidation, that money will still go to the debts, but you can reduce the minimum payment.
If you can accelerate the payments you make on a debt, by all means go for it. It also helps to leave your credit card at home when you go out. Even when you don’t have a spending problem, you can avoid temptation all together by just removing the plastic from your wallet.
Along with the payments you make comes the inevitable discomfort of cutting expenses. The fewer trips you take to Starbucks, the better it is for your debts in the long run. It may be hard to sacrifice, but you can find other ways to get what you want out of life.
Do you get a large refund each year around tax time? It might be a nice sigh of relief when it comes, but it could also mean that too much of your paycheck is being withheld for tax purposes. Rather than wait for that lump sum to pay out, reduce the amount withheld on your W-4 form and see the benefits all year long.
No one likes receiving a phone call from a debtor, so take the initiative yourself. In most cases, if you’re nice over the phone and negotiate well you can end up with a decent deal. Access your free annual credit report and review which debtors are claiming negative marks on your report. Contact those debtors and speak with them to see if they have the correct records on file. You might find out that the entire debt was a mistake, but you’ll never know if you don’t pick up the phone.
If you need to recruit some assistance repairing credit or consolidating debt, there is no shame in it. Before you end up losing your home to crushing credit card debt, call a financial counselor. Even if you don’t subscribe to their services, you may be able to form a reasonable budget you can use to get your life back on track.
Balance transfer cards can be a good alternative to high-interest credit cards. Department store cards are particularly guilty of being expensive! Move those balances to a low (or 0%) APR and increase the payments you make. You’ll pay more of the principle with little interest. Just be wary that the card rate is not “too good to be true” and that you pay off your debts before that teaser rate expires.
Create Multiple Streams of Income
The last part of debt relief is creating more income. Maybe there is a part time job you can take, or maybe you can write articles online for money. Even a few hundred extra dollars can make a huge difference in resolving debt.
Don’t give up! Debt is challenging, and it can be a burden to home and family life. Focus on paying it down and don’t let it destroy you. There is help out there for those who need it.