Let’s Work To Eliminate Debt
Do you feel like you are drowning in your own debt? You are trying to figure a way out of it but it seems it’s a never ending cycle. I’m going to share the tips I use with my clients to help the effectively payoff their debt in a timely manner!
Always Pay On Time
You are required to meet minimum payments on all your debt every month, skipping a payment in a month or not meeting the minimum payment will add penalties to your balance. Also, making timely debt payments will help maintain your credit score. One late payment can have a major impact on your credit score! Your debt history is the principal influence to determine your credit score.
The first step in creating a debt payoff plan is meeting your minimum payments every month. If you feel like you are not able to make minimum payments on all debts, then you may need to start by finding additional sources of income to sustain your lifestyle.
Focus On 1 Debt at a Time
In forming a strategic debt payoff plan, you must focus on paying down one balance at a time in order to efficiently eliminate debt. In addition to paying the minimum payments on all debts, concentrate any unrestricted cash towards paying off one balance at a time. You typically want to focus on paying off the debt with the highest interest rate first, those who have the cash volume available to take big bites out of your highest interest debt may use those discretionary funds to knock out the first priority balance. Once you have taken down your first balance you use all the funds that were focused on your first priority towards the next debt. As you move to the next debt keep applying all funds that were going to the previous balances to your one focused balance. Before you know it all your balances will be eliminated one by one!
Now for those who are more cash restricted, you may want to start with your smallest debt first to gain momentum to pay off your biggest balance. Gather all available cash to fund you first balance take down, put a lump sum towards your smallest balance and don’t forget to keep paying the minimum balance on all other debts. Every time you eliminate debt you have more funds to focus on the next debt in line. Now you have the extra cash to pay off that big debt balance.
Negotiate or Consider a Balance Transfer
The interest accrued is the cost to managing your debt, and when you are only making minimum payments you are barely putting a dent in the actual balance you owe. If you are able to negotiate lower interest rates on each debt balance it will make it easier for you to eliminate that debt sooner! When speaking to the representative stay calm and reasonable, let them know any hardship you may have come into, be sure to try negotiations early don’t wait until you have missed payments. When you are in good standing with the agency they are more likely to work with you. Now, if a particular representative is not willing to negotiate, politely hang up and try calling back to speak to another agent.
If negotiations don’t go your way, consider transferring your debt balance to a new credit card that specializes in balance transfers. These cards typically offer zero interest during your introductory period, there will be a transfer fee but now you have your debt at a place where it is not accruing interest. Make this balance your priority and eliminate it before the introductory period ends.
Cut Back on Discretionary Expenses
This is the tip that is most difficult for most of us, but eliminating your debt is more effective when you are not adding to it! The more cash you have to dedicate to your debt the faster it will be abolished. Try reducing expenses by taking a look at any unnecessary spending:
- Streaming services- do you really needs Netflix, Hulu, Disney+ and Prime?
- Eating out- all of us don’t pay attention to how much money we spend on eating out. Make you lunch during the week and eat out only on weekends.
- Save money- by canceling any unused subscriptions or start doing household chores on your own until you are able to eliminate your debt.
If you run into trouble or are not able to stay consistent with your debt pay off plan, reach out to us at Tax-Keeping By AC! There is no shame in needing help to get out of a hole, how to manage and effectively utilize credit or debt were not taught in school. If you implement and stay consistent utilizing these tips you will be able to knock out your debt, but if you need accountability contact us to schedule an affordable and personalized debt payoff plan.