Are you worried about the pending bills and debts? Is it something that’s affecting your monthly budget as well as overall finances? Well, first thing first, it’s the same for everyone.
Anyone who’s in this situation goes through stress and anxiety. The great thing is that it isn’t a permanent state. Yes, it’s eventually going to pass. To speed up the process and ease your worries, here I’m going to list down some of the most effective ways to tackle debt. Have a look:
Know What You Owe
To begin with, you need to know what you owe and who you owe it to. In case of corporate debt or credit card debt, you owe the payments to a bank. Speaking of domestic debt, it could be a bank or any other institution.
For starters, you need to check all your previous statements and add up the unpaid amount. In case of a loan, take out the copy of the agreement and check how much did you borrow, how much is still left to pay, and how much time you are left with to make the payments.
It’s a pretty scary process, but knowing an accurate figure is essential to speed up the process and plan things out. Knowing a concrete figure is better than just knowing that you’re struggling with your finances and debt.
Sort Out and Prioritize Your Debt
If you’ve finally made up your mind to pay off all your debts, you need to sort them out first. Not every debt is equal. Some are more problematic compared to others. It usually happens when one debt comes with a higher interest rate or quicker deadline than the other.
For this reason, you need to identify which debt is more important and which isn’t important enough. Divide your money according to the interest rate and deadlines of your debts. Remember to direct more money towards the most important debt. It’s all about prioritizing correctly.
Just to help you out, let me underline primary and secondary debts for you. Primary debts include the council tax, energy bills, car lease, mortgage, or rent arrears. On the other hand, parking fines, pending water bills, payday loans, credit card bills, and money that you owe to your friends or family can be defined as secondary debts. The reason is, the consequences of not dealing with them urgently are relatively less severe.
Create a Budget
The best way to show your financial commitment is to create a budget. Having a budget is essential if you wish to pay your monthly bills and make all the debt payments on time. It is more like a tool that you can use to get your finances back on track.
Building a budget is simple. Here’s what you need to do in three steps:
- Calculate your monthly income;
- Take out money for the necessities, including monthly bills and debt payments;
- And add the rest to your savings account.
Also, know that you shouldn’t be rigid when it comes to your monthly budget. It is going to vary from month to month, depending on your expenses and festivities. For example, you may need a few extra bucks in April as Easter is just around the corner. The same goes for other holidays, summer parties, Thanksgiving, and Christmas dinners.
It isn’t as complicated as it appears to be. Just stick to the tricks mentioned above and you’ll be good to go!