It’s a brand New Year and it’s about time you give your finances a fresh start. Those debts you’ve been burying and battling, hiding from and too scared to sort out? It’s time to put them first and start paying them down. Debts are holding you back and if you don’t get on top of them, you’re going to find it much harder to recover than you think. Burying your head in the sand over your debt is not going to help you get through those debts.
When you have a large amount to pay, it can feel never-ending and terrifying to face it alone, but you have to remember that this is just money and you can manage it with the right help. There’s no need to panic about debt and this year, you can start thinking about wiping the financial slate clean. Sure, you may not pay off all your debts in this one year, but that doesn’t mean that you can’t make a good dent in all the things you owe!
A little bit of debt is easy to manage, but a lot of debt can make it much harder to get the finance you need for a house, or to pay for the car that you know that the auto loan payment calculator says you can afford. You don’t deserve to feel afraid of your debt, not when you can face your financial worries head on and tackle them for good. So, let’s take a look at nine steps you could take to manage your debt and start living a little more free.
Step One: Figure Out What You Owe
Before you do anything, you need to make a proper list of your debts and be brutally honest with yourself over it. Every single company out there that you owe even the slightest debt to needs to be listed, with the amount that you owe next to it. Write down how much you pay currently versus how much you plan to pay (or can afford), and then you will be able to see the bigger picture of your debt and start breaking it down better. Don’t just discard this list to one side, either, use it and work on it. Refer back to it and score out the names of the creditors you’ve paid off as you pay them. This list is going to be your guide to being debt free.
Step Two: Pay Your Bills
Start paying your bills each month and stop leaving them too late. Yes, you need to pay the amount you owe, but you can also call your utility company and get your bills reduced. Ask for discounts and options to take money off what you pay. You can ask for loyalty continuance, so if you know you want to leave a company, tell them and they will be able to reduce your bill amount and this will help you to stay on top of your monthly payments. Keep a calendar on your phone or computer of when your bills need to be paid, and set your payments come out of your account the day after you are paid each month. Most companies are happy for you to set the date as long as it’s a monthly date and it’s paid!
Step Three: Make Your Payments On Time
Later payments add to your debt, so if you’ve been paying off debts and you have a payment coming out, you need to make sure that you don’t skip these. If you miss too many payments, your charges and interest will go up. This then adds to your debt and becomes hugely out of proportion to what you can afford. It’s not the ideal way to do things, and if you know that you can make a payment but it’ll be later than usual, simply ring them and ask to pay later. You would be pleasantly surprised by the number of creditors who would be happy to take a later payment without a charge if it’s a one off. Paying on time is the better option but you have to do what you can.
Step Four: Make a List
Another list you should make is of the dates your bills are due each month. Each payment amount and bill date should be noted so that you can come back to it and tick it off. It can be easier to manage debt if you can feel as if you are being proactive about it. Using a bill payment calendar, align your payments to the paydays you get and you will never worry about being unable to meet those payments.
Step Five: Always Make The Minimums
No matter what, you should do your best to afford the minimum payment for your bills. If you can’t afford the minimum payment, offer a nominal amount. Your creditors are often happy to go over your finances with you and help you to find solutions. If you call and ensure that you keep them in the loop, more often than not they will be happy to ensure that you can make some kind of payment. If you don’t call and you try to make a minimum or below minimum payment, you’re going to be on thin ice. The worst thing that you can do when you have debts is fail to communicate.
Step Six: Prioritize Your Debts
It’s vital that you understand the debts that you are paying, and which ones are the important ones to pay. The ones with the higher interest rates should be your top priority and you can use that earlier-written debt list to choose those that will be better paid first. Credit cards and loans have to be ordered so that the most important go first. That doesn’t mean that you ignore everything but the priority ones, it just means that if you can afford to put more money on any of your debts, you pay these ones off first.
Step Seven: Pay Down Charges
It can feel futile to keep paying for something that is all charges, but you can only pay as much as you can afford. When you have a low income, it can be difficult but you need to keep as many accounts as possible in good standing. This means paying off charges when you can afford it. Speak to each creditor, too, as some may be perfectly happy to come up with a deal that enables you to get money off of your charges and – in some cases – those charges can be wiped completely.
Step Eight: Have A Back-Up
The hardest thing about being in debt is knowing that saving is even harder. After all, if you can’t afford your debts, how can you afford a savings account? The thing is, without an emergency fund as a fallback, you’re going to find those little expenses stack up. Work a tiny fund together, starting with $50 n go from there. Ideally, 3-6 months of expenses is the norm for your emergency fund, but it may take some time to get this amount.
Step Nine: Know When You Need Help
Lastly, look at your management and how many debts you have. If you need help, there is plenty out there. There are free debt advice lines, online forums and articles and more. You can also look at debt consolidation and bankruptcy as a very last resort. All is not lost just because of debt.