Debt is a reality for most of us. From student loans to mortgages, there are plenty of ways we can be burdened by debt. But it’s possible to get out of debt if you’re smart about it and have the right tools. Here are some tips for managing your finances to get you back on track:
How much debt can you afford?
The amount of debt you can afford is the amount that you can pay off each month. The more you can pay off each month, the quicker you will be debt free.
The less debt you have, the more money you will have for other things.
Don’t waste money on interest
Our personal loans are designed to help you manage your debt. While it may sound counterintuitive, think of our Personal Loan as a great way to pay off your credit card debt. That’s because it helps you avoid paying the expensive interest charges that come with carrying high-interest balances on your credit cards.
Be honest about how much you’re spending
It’s a good idea to know how much you spend, how much you earn and have left over each month. Once you have a handle on this, figure out what your monthly payments should be by dividing the amount of money that’s left over by the number of months until the debt will be paid off.
Once you’ve done all this, it’s time to figure out how much money needs to go towards paying off your debt first. You may not want to put all of it towards paying off debts right away; instead, consider putting some aside each month for emergencies or other financial goals (like saving up for retirement).
Start with your high-interest debts first
It’s tempting to start with the debt that has the lowest balance, but that could actually cost you money. Instead of getting rid of a low-interest loan first, pay off your highest interest debts first. That way you’ll make a bigger dent in your overall debt load and save more money on interest charges.
You should also focus on paying off your debts that are closest to their due dates before those with longer terms remaining. After all, if you have a $20,000 car loan at 6% APR and another at 4%, it makes sense to pay off the one with a shorter term because it’s costing more per month in interest charges (and thus is costing more overall). In this case, even though both debts have similar APRs (6%), it will be cheaper for you financially, if they’re paid off sooner rather than later—so give priority to the ones that need to be repaid first!
Don’t miss payments, ever
If you don’t pay on time, your credit score may be affected.
- Your missed payment will remain on your report for seven years.
- You may have to pay a penalty fee.
- You may have to pay more interest.
- The creditor could raise your interest rate or close the account altogether.
Save for emergencies
It’s important to have an emergency fund. This is money that you keep in a high-interest savings account and use only for unexpected expenses, such as car repairs or medical bills. You should have enough money to cover at least 3 months’ worth of these expenses—but even better would be 6 months’ worth, so you’re covered if something pops up down the road.
If you don’t have an emergency fund yet, start by setting aside $1,000 in a high interest savings account and putting it into an envelope labeled “Emergency Fund.” When that money is spent on an emergency expense (and hopefully not too often), put the rest back into your account from the envelope until there’s enough again: then repeat!
Another great way to save for emergencies is by keeping a small amount on hand in your checking account. This should be between $500-$1,000 depending on what kind of lifestyle you live—if there are frequent unexpected events in your life or if things tend toward chaos more often than not! Having some cash ready will allow you to take care of things without having to make decisions under pressure. or risk borrowing from friends or family members who may be less likely than creditors themselves would be willing to extend credit given their close relationship with them already exists.
You can get out of debt as long as you are patient and stick to a plan
It is important to stick to your debt management plan, even when times get tough. If you are patient, diligent and honest with yourself, you can get out of debt as long as you commit to paying off the loans in full.
The first step is setting realistic goals for paying off your loans. You should also set aside money each month for emergencies and savings so that you do not have to take out new loans in case of emergencies or unexpected expenses like car repairs or medical bills.
Finally, it is crucial not to waste any money on interest payments by missing payments or spending more than necessary on credit card accounts because these things will only make it harder for you to pay back what you owe sooner rather than later.
If you’ve been struggling with debt, don’t be discouraged! Debt can seem like a difficult problem, but it doesn’t have to be. Follow these tips and you’ll be on your way to living debt-free in no time.