If you are willing to make the commitment, deciding to finally get yourself out of debt can be a life-changing. However, knowing how to manage your money isn’t always easy. Getting out of debt while trying to budget might feel like you’re walking on a tightrope without a safety net.
Even if you feel like all hope is lost, the experts at Ballast Associates put together this checklist to show you how to get out of debt responsibly:
Evaluate Your Finances
Create a list of everything bill you owe, including your monthly bills and credit cards. Review your overall debt and determine which will be the easiest to pay off in full the fastest. When it comes to your credit cards, look at the APR. Ones with the highest APR should be tackled first. The sooner you get those paid off, the less interest you’ll pay.
You can also look into balance transfer cards and cut your interest rate in half. Reach out to your current credit card companies and see what they have to offer. However, do your research prior to transferring your balances. You need to make sure that they won’t report your credit cards as closed on your credit report.
Student Loans
If you’re saddled with student loans, you also need to factor this into your budget. Skipping your student loan payments can lead to wage garnishment and will also destroy your credit. The government can even seize your Social Security benefits. If it’s impossible to stay current with your student loans, contact your loan servicer to see if they can consolidate your loans.
Prioritize Spending
If you don’t change the behavior that led you into debt, you may never be able to not fall back into poor spending habits. Above all else, you need to understand the importance of your wants and needs. You need food, clothing, and shelter. You would like to have a new car and go on vacation. You must prioritize what’s most important.
Determine how much you need to spend on the necessities each month. For example, if you need $400 a month for grocery, you need to stick to that amount. The same holds true for transportation and even recreational activities. While recreational activities do fall into the “want” category, you also can’t deprive yourself of every little thing. You do, however, need to cut back and limit your spending.
Create a Budget
Once you’ve prioritized needs, wants and debts, you then need to establish a budget. Creating a budget will help keep better track of what you’re spending each month on recurring living expenses and how much you can put towards shrinking your debt.
The Bottom Line
Getting out of credit card debt doesn’t happen overnight. It takes time to rack debt, so it’s going to take some time to pay it off. The most important thing to remember is that making consistent payments pay off. Pay at least the minimum payment due each month to keep your account in good standing.
If you’re struggling to get out of debt and need help, enlist the help of a financial adviser like the ones at Ballast Associates. A financial adviser can help you cut corners and finally get out of debt