By now you must have tried out various tricks to control your overwhelming debt obligations. However, it is very likely that you’ve failed in those attempts, if your efforts to get out of debt were not in line to what financial experts suggest.
So, here in this article you’ll find some of the tips offered by debt experts in order to help out people like you to straighten up their finances.
A guide to make a definitive debt repayment plan
Primarily, you’ll have to write down all your debts in one place and determine the sources through which you’ll pay those down. Your repayment plan shouldn’t sound difficult and it should be geared towards one simple goal – to get out of debt. However, you need to find out your own weaknesses as well as strengths while working out any such plan. Before that, you would want to go through the following essential points:
Make a budget – This is the most important financial tip you’ll ever come across. It’ll help you to control your expenses and handle all the financial resources you have in an efficient manner. The money you don’t spend will be the one with which you’ll be making the debt payments and so, act accordingly. Simply remember to allocate 15% of your income for savings and keep the remaining 85% for expenditures.
Use a debt repayment widget – It is good to start making your debt repayment plan with the help of an online widget. For instance, you can take advantage of a debt calculator in order to find out the time you would take to pay off all your existing loans. If you are thinking of just making the minimum payments, then you can use a free calculator to know about your overall debt challenge.
Choose a repayment strategy – After all this while, what you need to do is organize all the debts and choose the most appropriate repayment strategy as per your financial health and long-term goal. In this case, you may pay off your debts by taking on the highest interest rate loans first. Pay off these debts with all the left-over cash you have at your disposal and gradually move on to the next one, once the former one has been repaid. On the other hand, you can follow in the principles of snowball effect, reportedly popularized by renowned debt expert Dave Ramsey. Through the snowball method, you’ll have to first repay the smallest balance first and go higher up the debt ladder steadily.
Be insistent on repaying – Additionally, you’ll have to be firm in your resolution to get out of debt and in order to achieve that you’ll have to be aggressive with your monthly payments. Remember that every penny is important for you and that each one of them will help you to make extra payments. As a result, you’ll be saving on excess interest payments.
Lastly, you must fortify your finances with a good amount of emergency fund. This will act as financial backup during sudden unfortunate crisis and prevent you from borrowing heavily