If you’re in debt, you’re not alone. Consumer debt in America is extraordinarily high. Sometimes it’s hard to know – or admit – if you have a problem with debt. It can be overwhelming to realize that youíve gotten in over your head, and to worry that you wonít be able to pay back what you owe. The key to getting out of your situation is to act now. Donít procrastinate. Taking charge of your finances and creating a plan for tackling your debt will cut down your anxiety and get you on the path toward a better financial future.
First, ask yourself whether debt has become a problem for you. Here are some circumstances that might indicate it has:
- Next month’s bills arrive before last month’s have been paid
- Your bills often include late fees
- You avoid opening bills when they arrive in the mail
- You procrastinate balancing checkbooks
- You bounce checks
Write it Out
Do you actually know how much debt you have? Many people don’t. Start by making a list of everything you owe, whether it’s a mortgage, a credit card balance, student loans or even money you borrowed from family or friends. Write down:
- The lender’s name
- The amount you owe
- The term of the loan
- The interest rate and fees
Then total them up. Looking at the numbers can be worrisome, but this is a positive – and necessary – first step to tackling your debt.
The power of 50
Paying the minimum amount due on your credit cards is one of the fastest ways to fall further into debt, and it can keep you in debt for years or decades.
If you have a credit card with a $3,000 balance at an annual interest rate of 18%, and you pay only the 2% minimum monthly payment of $60 per month, it would take you 8 years to pay off your bill. Not only that, you will have paid $5,780 by the end of the 8 years – almost double the $3,000 you thought you were spending when you made the charges.
Paying just $50 above the minimum amount due each month will make an incredible difference in how quickly you can pay down what you owe. If you pay an additional $50 per month toward your $3,000 balance for a total payment of $110 a month, you could pay off the debt in 3 years instead of 8, and save yourself over $1,800 in interest. Imagine what you could do with $100 more per month.
But if you can pay an additional $50 per month on that debt, for a total payment of $110 a month, you will pay down more of the $3,000 you originally owed. And that means less money for the creditor to charge interest on. As a result, you would pay off the debt in 3 years and save over $1,800 in interest payments.
Imagine what you could do with $100 more per month.
Now that you have analyzed your debt situation, itís time to look at your monthly budget and set realistic goals. That trip you had planned for next summer, or the new car you were hoping to buy may not be in the cards right now given your new outlook on reducing your debt. Use this free Rework Your Budget calculator to help you get your budget back on track.
Don’t get discouraged
Reducing debt is like losing weight. You’re not going to lose 50 pounds in a month – you need realistic goals in reasonable timeframes, and debt works the same way. For most people, it takes years to become debt-free. This doesnít mean you have to stop enjoying your life. Itís just a reminder to live within your means and be diligent about adjusting any spending habits that have contributed to the situation you are in today. Dedicating yourself to paying off what you owe and becoming debt-free will be worth the wait, with the payoff being a brighter financial future.
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Posted by: enough
I have tried to consolidate my bills with my credit union and I was decline because of credit report. If, this makes any sense and hoping it does if, I consolidate the bills to one and pay the loan would that not be easier? I have two main bills the first part of the month with monies left over. All credit cards are requesting monies the first part of the month which is impossible. How am I suppose to budget that? and the same for the last part of the month. The credit cards asking for more then I have left. With consolidating I can make two payments a month and everyone can get paid.
Posted by: MichelleT
By personal experience, I would say debt consolidation is one of the best options to get out of debt. I would say that with debt consolidation, we can easily get back on track and as a result reduce the debt burden. The best part is that most consolidation loans generally have terms of five years or less.
I got a lot of useful information on debt from Debt Consolidation Care Community and thought of sharing it with you.
Hope this will be of great help for many people like me.
Posted by: MRSLB
Can someone please tell me where i canconsolidate my bills. Just separated from my husband and feel like my whole world is crashing down. I am living strictly pay day to payday.
Posted by: naturalqueen62
Facing debt is the first step in alleviating your debt, and paying more than mimimum illiminates time and saves an indivual a substanial amount of money.
Posted by: BrightFuture
you can try asking your creditors to change your bill cycle. Alot of companies are willing to do that, that way you can line it up according to when you get paid.
Good luck! You are not alone!