Do you have debt? If so, you’re not alone. Do you have a lot of debt? You’re still not alone. The average American with debt has about $37,000, and as many as 10% have debt exceeding $100,000. Debt contributes to anxiety, stress, and general well-being for many. If you’re struggling with debt, knowing that others are struggling alongside may not be helpful.
What you really need, is to figure out what to do about your situation. Here are some tips to help you get started.
- Figure out where you are. Order your credit reports if you haven’t done so within the last year. Each of the three major credit bureaus will provide you a free report once annually. Look for errors and evidence of fraud. If there are items on your report that are unresolved, make a plan to tackle them.
- Make a basic budget. It doesn’t have to be anything fancy, but get a feel for how much you take in and what your fixed monthly expenses are for thing such as housing, car, minimum debt payments, and utilities. Then look at how much you have left over and set a reasonable plan for your non-fixed expenses such as food and gas. With whatever is left, decide how much you’ll apply to getting out of debt. Set a little aside for emergencies if you can. You may also want to use some for entertainment, a meal out, or some other small expense so you don’t burn out too fast. Just don’t overdo it.
- Analyze your debt. List your creditors with how much you owe, the monthly payment, and the interest rate. This step may be painful, but it will help you to know exactly what you’re up against so you can begin to pay it off. There are two popular methods to paying off multiple credit cards.
- Snowball: Pay the minimum amount due on all cards except the one where you owe the least. Then attack that balance with everything you’ve got. Once it’s paid off, take that amount and apply it to the next smallest balance. This will chip away at your debt most quickly.
- Avalanche: Pay the minimum amount due on every card except the one with the highest interest rate. For that card, pay all you can. When it’s paid off, move on to the next highest. You may find that it takes you longer to crush that first card, but you’ll have accumulated less interest charges over time, ultimately saving you money.
You didn’t get into debt overnight and you won’t get out of it overnight either. You will have to work hard to pay it down. Taking steps to control your debt can get you started.
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