If you are overwhelming in debts and are desperate to get yourself free of debts, you should make a workable plan and strategy to pay back all your debts. The matter of fact is, by using the right and effective strategy, you will surprised yourself by figuring out how much interest you can save for your money. And if you do not know how to come out with a plan and strategy, you can try to use the recommended steps here.
List down all your debts
By enlist all your debts you will have a better picture of your current financial status. Without knowing your financial position, you may not really care to get rid of your debt. The list should contained all the debts that you owe with the detailed of their respective amount and interest rates need to clearly stated in it. Never try to miss out any required items and information in the list such as your mortgages, the credit card debts, other loans, and also any cash which might have lent to you by your family or friends.
Put your debts into categories
It is possible to categorise the money you owe into good and bad column. Although it can be quite strange as this sound to be but this can be quite important. You should know by yourself that actually not all debt is equal one with another. For example, a loan can be categorise as an investment instead of a debt and thus it can be categorise as good debt. You can’t risk coming to a absurdly high payments on interest rate. In contrast, debts for your credit card don’t provide you with any kind of tax reduction and don’t even provide you with any value of asset. Therefore, credit card debt is categorised as bad debt. For more information, there are additional examples of good debts such as car loan, mortgage, and student loan. In contrast, store card debts can be categorised as bad debt.
Prioritise your debts
When considering arranging your priorities for your debts, you should arrange them in a way that prioritise to pay off all your bad debts by keeping them as the front items while putting good debt at the bottom.
You should listed those item that carry the highest interest rate to be the first in the list for you to pay back. Typically, the first of your list will be those department store cards or credit cards. To work them out, you can try to shift the owing amount from those credit cards which have high interest to those that don’t charge with lower interest.
At the time you finish doing so, you can now start put your attention on those credit cards debts and pay them off. You are able to keep on paying minimum amounts on your other cards while you make as much payments as you are able to on the high interest credit cards.
Change your lifestyle to live below your mean
You are able to try to squeeze on your monthly disposable income in order to churn out a little extra each month. You should try to cut down any unnecessary expenditures each month. This can be achieved by continuing to keep track on where your spend your money by recording all your expenses into the list. By doing so, you are going to get shocked by yourself on how many unnecessary expenditures you been made for years without you realised on them.
Get rid of all your expensive habits and refrain yourself from buying any big ticket item anymore. In a nutshell, concentrate with all the money you posses on paying off your debt. You are the one who in charge of your own money and by consistently repay your debt and one day you will found that you are suddenly set yourself free from any debt.