You are not alone if you owe money on car loans, credit cards, or student loans. Recent statistics show that the national household debt is around $16.15 trillion! The figure is huge enough to suggest that debt anxiety is a national epidemic. It can be difficult to accomplish your financial goals, such as saving for a vacation or retirement or building an emergency fund.
Here are four tips for managing and clearing your personal debt and enjoying financial freedom.
1. Have A Realistic Budget
Keeping track of your expenses and income can help determine whether you have enough money to pay off your debt. You can shorten your repayment period by paying more than the minimum monthly. You may be tempted to commit all funds to debt repayment. However, ensure to set aside some money for emergencies. Even the smallest savings can keep you from going into debt should there be an unexpected event.
2. Get A Side Hustle
Extra money can help you pay off your debt faster by increasing the amount you can put toward it. Whether you have a few large credit card bills, student loan debt, or a large purchase in the works, your side job might be an excellent method to make lump payments without affecting the balance between your main income, budget, and living expenditures.
In addition to balancing these expenses with a different income source, speeding up debt repayment can save you a lot in interest and fees. Finding legitimate side hustles to increase your income sources would be best.
3. Find & Stick To A Debt Repayment Plan
Debt repayment isn’t only a financial commitment but a psychological one too. Aside from having the money to begin repayment, you will require a payment method that works for you. For instance, you can adopt the snowball method if small wins motivate you to pay off your debt. This method requires paying off your small debt first.
So, in this case, it’ll be better to make $300 fast to pay off a debt of that size than wait to save enough to pay off a $1000 loan. Afterward, you can focus on paying the next largest one and continue like that until you finish paying all your debt.
4. Consolidate Your Debt
Your debt can be easier to manage and less expensive when combined into one payment. Consolidating your debt is ideal when it has lower interest rates. This means that you will pay less on interest and have more to commit to lowering your underlying debt. It is worth noting that debt consolidation is only available to individuals with a good credit score. Additionally, every lender may have its own requirements. So credit scores might be just a piece of the puzzle.
A recent study suggests that roughly 40% of borrowers with high-credit scores use funds to consolidate debt. Debt can sometimes be beneficial in that it can help you build credit or achieve goals that would be difficult to achieve without a loan. But, having too much can hurt your credit score and accumulate interest you wouldn’t want to pay. So, try to pay it off as fast as possible!
<p style="text-align:left;"><p style="font-size:8px;"><em>Featured Image Credit: <a href="https://unsplash.com/@towfiqu999999">Towfiqu Barbhuiya</a></em>
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