Each one of us had experienced the vicious circle of paying off our debts at least once in our lifetime. There’s no doubt whatsoever that Americans have a serious problem with debts. According to statistics, Americans are losing almost $1000 each year to interest on their credit card debt. If you don’t carefully plan your finances and pick the right payoff strategy, paying off your debt can easily turn into your worst nightmare. Do you feel like you are running in circles and at a loss what to do when it comes to paying off your debt? We can help you get back on track and unravel the debt spiral in just three steps.
Know how much you owe
No matter how much effort we put into trying not to overspend, we subconsciously fall into that trap. One debt is followed by another creating a domino effect. Sooner or later we get to the point when we don’t know exactly how much money we owe and then things get a little bit confusing and overwhelming. If you haven’t done for some time, take a stock of how much exactly you owe, to whom and at what rates. Don’t just keep on shifting the burden. Instead, make the first step towards your financial freedom. Put everything on the table including your credit cards, student loans, car loans, and mortgage and face the reality. Then, go online, log into your accounts and tally it all up. This first step is the most challenging, but once you have an insight into how much money you owe all other steps will become easier. You can even use a calculator to find out how long will it take to get on the road of financial freedom. Next, try to answer the following questions:
How much do I owe?
How much money do I spend on interest each year?
How much of the monthly salary do I spend on paying off my debt?
- Find a debt strategy
Once you have answered the questions above, start making a plan. Essentially, you need to think of the way how to start paying off more money. Waiting for some rich member of your family to help you or for extra money to just come along won’t help you much. Instead, find a proven system and most importantly, stick with it. There are many ways to do that. You can start by paying off smaller debts and then move on to the bigger ones. This means that you need to focus on one debt at a time and do everything that’s in your power to pay it off before moving onto the next one. On the other hand, you can take the quiz to find out your debt strategy and make it more manageable. It will help you get a better view of where to start and motivate you to stay on the track until you reach your goal.
- Stay on the right track
No matter how demanding and overwhelming this road can get, never lose focus. If you have a strong will to get rid off all your debts and reach the moment when you don’t have to think about how much you owe and to whom, you will do your best to stay focused. In order to do that, it’s essential that you keep an eye on your progress. Once you realize how much you have achieved, you will become even more motivated and you would like to continue fulfilling your mission. Even if you have a bad financial month, don’t stop striving towards your goals. Pay just a smaller amount of money and then get back on the track the next month. Whatever you do, don’t give up.
Be mindful that these three steps only make sense if you don’t keep adding up to your existing debts. The best way to avoid that is to create a small emergency fund where you will be able to put a small cash reserve for all the unexpected expenses that will happen along the way and stay on the track for your debt repayment plan.