Sorting out debt problems can give you more financial freedom and simply make sure you’re less stressed. Here are some tips on how to do it.
Get The Whole Picture
Before you do anything else, you need to understand the entire financial picture that you are facing. Gather up your bank statements and make a pile of every outstanding bill that you owe. Write down how much you need to pay each company and what the interest rates are. From there, you can figure out which bills you need to pay first and which ones can wait.
Come Up With A Budget
Once you know what you owe, you need to figure out what you can pay back each month. There are online budget calculators that can assist you. Basically, you need to figure out how much you pay to live each month. This would include your mortgage or rent, groceries, utility bills and more. Subtract that number from the amount of money you make. The figure that is left over can be earmarked toward debt repayment.
This is important information, because you can’t come up with a repayment plan unless you know how much you have to send off each month.
In addition, as you work through these numbers, take a look at what you are spending your money on. Are there cuts that you can make? Are there things that you are paying for that you simply don’t need? For example, rather than stopping to grab a cup of coffee in the morning, brew your own at home.
Find Out More About Your Overdraft
If your interest rate on your overdraft is very high, it is not going to be easy to pay back your debt.
Look to see if there is anything different you can do with respect to your overdraft. For example, you may be able to switch to a different account, and in doing so, make your financial situation a little less dire.
There are even companies that will give you a cashback bonus to switch to them. Remember, though, that you will likely have to go through a credit check before anything can happen.
Pay One Debt First
It is difficult and overwhelming to try and pay off all your debts at once. Instead, choose the debt with the highest interest rate. Pay as much as you can on that debt while making the minimum payments on the other debts.
Once you are finished with the first debt that you targeted, select a second one to work on. Continue with this method until you are free and clear. It is a nice feeling to start checking creditors off the list.
If you have looked at the numbers and just don’t see a way out of your situation, get help. There are organizations that can organise your debt into a single monthly payment and that can assist people that are dealing with debt; the best part is that it doesn’t cost any money to talk to them.