7 Strategies to Manage Debt and Regain Your Financial Wellbeing
Proper debt management leads to financial security in the future – something we all hope to achieve. In fact, much of our financial success depends on our ability to manage debt, which when properly done, allows us to regain our financial wellbeing. The more you know about debt, the better you can effectively manage your finances and succeed, so it’s always a good idea to learn about better money management any opportunity you get.
What is Debt and When is it Bad?
Millions of people around the world owe some sort of debt. Having debt is normal, as we all have financed things and owe money to our creditors. And while having some debt is normal, it can also be a bad thing if it is not the right kind of debt to carry. Money owed for things like a home mortgage, automobile loan, and student loans are fine, but bad debt like high interest credit cards and loans with excessive rates can affect your credit score in a negative way.
Manage Debt of Any Size with These Strategies
When it comes to managing your debt, there are some tried and true strategies that can really help you gain control of your finances and regain financial wellbeing. Here are some of the best ways to manage debt and regain control of your finances.
1. Know How Much You Are In Debt
To understand the condition of your finances in terms of managing debt, start by compiling a list of every outstanding loan payment, credit card bill, and invoices you owe. Sometimes seeing your outstanding debt in a spreadsheet or in a list can help the realization set in that it is time to create and stick to a plan.
2. Don’t Create More Debt
Once you have a solid grasp on exactly what you owe and to who, a crucial part of your debt management strategies should include paying off debt and making it a point not to create any additional debt – good or bad. Make it a point not to open any new accounts, make any major purchases, or spend excessively while planning a debt management strategy that will work for you.
3. Look into Debt Consolidation
A wonderful way to manage debt is to get rid of outstanding high interest loans and bills through debt consolidation. Contact Members Plus Credit Union for information on how a Home Equity Loan, Home Equity Lines of Credit (HELOC), or a Personal Loan could help you consolidate your debt into one easy monthly payment, while lowering your interest rate, potentially saving you extra money.
4. Know Your Credit Score
To know exactly how much debt you have and how it impacts your credit score; it is important to regularly check your credit report with all of the major reporting bureaus. This will allow you to see a list of your creditors as well as the type of account, monthly payment, balance owed, and payment history of each debt. Once you know exactly what you owe, you can make a plan to manage debt for future financial success.
5. Manage Debt with a Plan
Create a plan to pay off, reduce or consolidate your debt, which includes sticking to a budget. If you share accounts with a partner, both of you need to participate and be onboard for your strategy to work. Here are two of the most popular debt payoff strategies to consider.
6. Debt Snowball Method
When using the debt snowball method to manage debt, you are rewarded for successes in your quest to pay off your bills. Start by paying off the smallest debt first while paying the minimum balance on all remaining outstanding debts. Once the smallest debt is paid off in full, take that monthly payment and put it towards the next smallest outstanding debt. The consistent progress will offer motivation to continue this process until all your debts are paid in full.
7. Avalanche Method
This debt payoff method focuses on paying off the debt with the highest interest rate first. This means that the bills that cost the most in interest are paid off first so that money is not wasted on outrageous interest payments that come with each unpaid statement balance. Once the debt with the highest interest rate is paid in full, place that monthly payment towards the next highest interest rate debt and so on. It is important to note that all outstanding loans should receive at least the minimum monthly payment keeping your credit in good shape.
Manage Debt with Help
Are you ready to manage your debt and successfully regain your financial wellbeing? Member Plus Credit Union’s free Money Management tool can be a valuable resource when looking for help to manage your spending. Our experienced team of professionals can offer a variety of solutions to help you focus on your financial future and set you on the path to becoming debt free. Contact us today to get started.
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