Some people assume bankruptcy, credit negotiations or debt settlement is the only way to resolve debts. The truth is, many people are successful in getting out of debt on their own without the need for a third party or extreme tactics. While getting yourself out of debt takes focus and commitment, it isn’t as hard as you might think.
Developing A Plan
It is important to remember two things about debt management: (1) your financial situation is 100 percent unique and (2) not all plans are created equal. The best place to start is to evaluate your debts in relation to your budget and income. If you don’t already have an specified budget for your monthly expenses, get one. Having a concrete budget outlined that specifies where your income is to be spent each month is a must-have of the debt resolution process. Outline how much you spend on essentials like housing, utilities, food and transportation. Prioritize your debts as one of your budgeted payments each month.
Once you have your debt payments placed into your budget, evaluate whether you can afford to put any extra money towards at any of your debts. Some people choose to focus on one debt account and pay all their extra money towards paying it off, while they pay only minimums on the remaining debts. This is not a bad strategy, but it is important to pay off the most crucial debt first. A debt that may have an interest rate hike in the near future or has a time limit on repayment should be paid off before other accounts. If choosing to pay down one at a time doesn’t work for you, or you feel like you aren’t getting anywhere, spread your extra payments among several debt accounts. The key is to find a debt reduction strategy that is rewarding enough to keep you consistent each month.