Sometimes we find ourselves in over our heads. It just happens. It is life. It is often a result of spending more than we bring in, but it could also be the result of major illness, college tuition, job loss, etc. Regardless of why or how we go into debt, it takes a toll beyond a financial one. It affects our attitudes, our relationships, and burdens our daily lives.
We have taken on more debt than we can afford. What can we do to right the ship? There is hope. We can put our lives back together with just a little planning.
Here are four things you can do to reduce your personal expenses and get back on your feet.
1. Pay all of your bills on time. Often credit cards and other loans have contract provisions that allow them to raise your interest rate if you do not pay on time. Additionally, every day you are late, interest gets added onto the outstanding balance, increasing your debt even more.
2. Pay more than the minimum payment. Minimum payments usually cover only the interest, and the amount you actually owe never goes down. Your debt will never be eliminated. By paying more than the minimum, your debt will eventually go away. The interest rate you pay and the payment you make are based on the outstanding balance, so the lower the balance, the less you pay in interest.
3. Pay more on the accounts with the highest interest rates. By making your largest payments to these high interest rate loans and cards, and smaller payments to your lower interest rate accounts, your debt will be eliminated sooner at a lower overall cost. Then, as your cards are paid off, you can use the amount you’ve been paying to pay off the remaining cards even faster.
4. Use your savings to pay off your high interest debts. The amount of interest you get on savings is usually a very, very small amount. It is considerably less than the interest you are paying on any of your debts. Using your low yielding savings to pay your high interest loans will save you thousands of dollars. When those debts are paid off, you will be in a better position to put even more back into savings.
Just imagine how much more money you will have when you are debt free. It amounts to a raise in pay. Get those debts paid off and live the life you have always wanted.
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