There’s very little you can do to make managing debt fun. Maybe the only fun prospect is knowing that every payment you make will bring you closer to stability. This is not the case for those with insurmountable debt.
Balancing monthly debt payments with your living expenses is the most challenging part. You don’t want to cut back to the point where you’re at the edge of poverty. It’s even worse to keep spending and borrowing like there’s no tomorrow. What you need to strive for is a sense of balance. During that search you might be surprised to find a comfortable, but affordable, quality of living. Listed below are some methods to help you get started.
Set a Budget
An unpleasant thing about owing so much debt is how some of it can sneak up on you. It’s possible to head them off at the pass by taking the time building a budget.
Knowing what debts and due and when they’re due will help you set money aside. Start by determining your immediate goals-groceries, health care products, transportation. Calculate those numbers to factor into your long-term budget for the entire year. After that, tally up your yearly income. Include everything you earn from work, special event gifts, and anything else that would be listed under bankruptcy exemptions.
Halt Credit Card Spending
Chances are that most of your current debt was incurred by credit card spending. Next time you go shopping leave the cards behind.
Cancel your current credit card plans, and adopt alternate payment options. Debit cards function the same as credit cards, but funds are immediately withdrawn at checkout. If the ease of withdrawal is a concern, then just focus on your cash flow. Using cold hard cash gives you a solid measure of your available capital. There’s also no risk of repossession.
When it comes to paying your debts, you might be tempted to use the “snowball” method. Snowballing debt begins with paying-off the lowest debt amount owed and working your way to the highest. This doesn’t account for interest rates which may make this process take longer.
The “Avalanche” method suggests the opposite of the “Snowball.” Avalanching involves calculating the interest rates of each debt to determine the highest amount. After that, throw most of your money onto the highest and work your way down. Those who’ve done this were surprised by the fast pay-off rate.
Balance Transfer Cards
If you really need to have one credit card available for emergencies, then make it a balance transfer card. With a balance transfer, you can consolidate all of your balances on a card with a 0% interest rate.
The zero sum interest owed on the card will only last for a set number of months. A service charge of 3% will apply when you move your balances to the card. Be sure to pay-off all debts on your previous cards. Once you do that, a sizeable chunk of your debts will have already been paid.