The secret to a successful debt management strategy will work out precisely how much you owe and generate a plan to clear a debt. Straightforward. Well sort of. Getting into debt is easy to understand – e.g., by paying slightly more than you make every month. So the obvious answer to your debt mountain is to spend somewhat less than you make monthly.
Just how much do I use?
Sit down with a bit of paper and write down every debt you have (besides mortgages). Yes – you do need to start these statements you have been ignoring — separate personal loans from a deficit. Together with your credit card debt, also notice that the outstanding balance, rate of interest and minimum payment. Do the same for personal loans except, rather than minimum repayment you will have your contractual monthly compensation. In case you have some additional outstanding debts, e.g., council tax arrears, etc. include this into your calculations.
Now for the harsh bit. Add them all up. It is essential at this stage to realize that regardless of the size of your debt – there’s a solution.
Prioritize all your debts
Top of your priorities is not losing your property. Make sure you make mortgage payments on time. Check that you’re not paying too much – shop about or get in touch with your lender to see if you can move on to a lower rate. Talk to your mortgage provider if you are coping with your mortgage payments. They will want to learn if you’re experiencing problems. It’s more cost effective for them to help you to repossess your house and sell it at below market value.
Next is to be sure to cover your council tax debts. If you don’t pay your council tax the board could make benefits and wages arrestment, sell off products in your house or even worse imprisonment.
Ultimately, in your hit list, are debts which have high rates of interest. Attempt to transfer them onto reduced rates or interest-free credit cards. Even talk to the creditor and negotiate a lower speed together, with the threat that you will accept your debt elsewhere. Bizarrely this can work!!
The snowball approach
This involves identifying the most expensive debt, i.e., that the highest APR and placing any spare cash to paying off that, while just paying the minimum payment on the others. After that, aim the upcoming expensive debt and so forth. It can easily be noticed that snowballing will save you money in the long run.
They understand how much they earn and know just how much they can spend. They also probably wash their vehicle, Hoover, and dust daily. People who are organized do not have any they have manageable debt. You too can become financially organized, draw up an SOA (Statement of Affairs). (However, you won’t need to wash the car, hoover, and dust daily!)
Many people that are developing a debt control plan neglect to include an amount for contingencies. All these contingencies can be split into two regions – predictable and unforeseeable. To work out the foreseeable, try and decide on a budget for Christmas presents, birthdays, etc. and integrate it into your SOA. For unpredictable, create a small allowance but don’t fret about it.