It often seems to be an uphill task when you try to pull yourself off your debt burden. However, you must realize that managing debt isn’t impossible when you opt for the right strategies. If you’ve been looking forward to living life debt free, you must understand certain facts about managing debts realistically.
Follow these steps to lead a debt-free life:
Stop adding more to your debt
Preventing yourself from accumulating debt is your only option to pull out of a debt burden. The cycle of debt may continue when you keep on using your credit cards, loans, and overdrafts. Your debt level will fall slowly when you’re trying to make the minimum payments and not acquiring fresh debt every month.
Consolidate high-interest debts
Managing debt seems tough if you’re carrying several debts with varying rates of interest. Few of the debts even charge you with interests worth 20% or higher. You’ll find an effective solution by combining your debts into a single loan with just one rate of interest. This process is known as debt consolidation. It lowers much of your debt burden besides saving much on the whole. You’ll find it tough to manage debt when you’ve spread it among personal loans, store cards, overdrafts, payday loans, and credit cards.
Like any other loan online, these debts are also known to charge higher interest rates. Your interest liabilities can be lowered by up to 50% once you consolidate your debts into a loan.
Enable automatic debits for your bank accounts
Managing debt gets tougher when making minimum payments only. Paying more than the minimum amount will help you to manage the financial situation, bear lower interest, and bring down your debt burden within a short time. In order to pay the amount automatically, you’ll need to allocate the direct debit facility. You may consider making payments more frequently instead of making payments after every fortnight or on a weekly basis.
Draw your budget
Budgeting is an easier method of managing debt but it’s quite effective. You’ll gain much better control over your financial situation once you make a note of your monthly expenses and income. It will help you identify the areas in which your cash is flowing and even helps you set limitations for managing your finances in a better way. You’ll be surprised to know how you spend money unnecessarily, which would otherwise yield a significant fund in the long run.
Compare various service providers
Debt management is actually about restricting the cost of debts. You’ll find certain financial areas wherein you can make good savings and utilize better deals. Some consumers prefer to continue with the same old plans when it comes to car servicing, cable television, internet service, health policy, and smart-phone service. While visiting the market, you’re likely to come across a few deals that provide
extra money-saving opportunities. You’ll end up saving much in the long run if you prove to be a wise consumer and switch over to simpler and more inexpensive options.
Pay bills within due dates
This is an important step towards budgeting. While some people tend to pay their utility bills late, others may choose to meet them within the due date. You may have to pay a higher amount or may even lose your credit rating by paying your bills late. Late fees are often charged by certain financial institutions. It’s often quite expensive and bad to defer your bill payments. You’ll certainly be able to manage your financial situation more efficiently by meeting all of your utility bills on time. It will even help you figure out that amount of disposable income that you actually have in hand.
Bring your debt under control before you start saving money
Reducing both the principal and the interest are important for restricting your debt burden. Although the rate of interest may be lowered by consolidating the debt, you may still be wondering how to bring down the principal. When it comes to paying off debt directly, allocating a portion of your income is a good ploy. Your first priority is to lower your debt although it’s equally important to save a certain sum of money every month.
Stressing more on wealth accumulation gets easier once you turn debt-free. The interest that you earn out of your savings is usually lower than the interest that you pay for a debt; a savings account rarely yields interest over 6%. The amount of dollars that you earn out of your savings interest gets lost over the interest accrued on your loans and credit cards. The good effects of savings are negated when your debt gets out of control. You may concentrate more towards lowering the principal on the debt after you set a portion of your savings to be spent towards repayment. It certainly becomes much easier for you to accumulate wealth when you become free of debt.