“Debt is the worst poverty” -Thomas Fuller
Have you ever felt overloaded or consumed with debt? Due to our current debt epidemic, millions of Americans have experienced these same emotions.
The average American household faces approx $130,000 in debt (mortgages) and approx. $16,000 in credit card debt, according to the Federal Reserve.
Get a Grip On Debt
Most people think that obtaining financial goals may be a far reach, a dream, or only for the rich and famous. That couldn’t be further from the truth. The good news is that it isn’t as hard as we may think. In fact, the keys to obtaining wealth are self-discipline, determination, and consistency.
Before you start investing your cash, most financial experts suggest that you pay off as many of your “bad debts” as possible. Some examples of bad debts are credit card debt and high-interest loans.
You can conquer your debt, but you have to get a grip on your debt by facing it head on!
5 Step Debt PayOff
- Figure out what you owe. It will be difficult for you to pay off your debts efficiently without first knowing the amounts you owe.
- Create your debt payoff plan. There are two main ways to attack debt. Balance-Based vs. Interest-Based. Balance-Based means you eliminate your debt with the lowest balance first. The Balance Based method will give you momentum and confidence for paying off the next debt. The Interest Based method simply means to eliminate your debt with the highest interest rate first. The Interest Based method will save you more money in the future due to less interest paid. Repeat either process until all debts have been paid off. Choose whichever method fits your payoff plan better.
- Set up automatic payments. This will help you avoid any late fees or penalties. Late fees and penalties will delay your debt payoff time.
- Pay more than minimum monthly payment. Paying more than the minimum amount will be the only way to make a dent in your debt. Any extra cash you receive should be put towards your debt. Rewards often follow sacrifices.
- Cut back on credit card spending. Credit agencies like Credit Karma suggest that you keep your credit card usage below 30% of the credit card limit. Never spend more than you can pay back with one paycheck. Do not leave your credit card with a balance at the end of the month. In most cases, credit card balances accumulate interest if the balance carries over into the next month. More interest equals more debt.
Paying off debt is not something that will happen overnight. Tackling debt takes self-discipline and dedication. Keep track of your progress, stay consistent with your methods and your efforts will show. Don’t forget to reward yourself once you’ve reached certain payoff goals!
