Facing large amounts of debt is very disheartening, especially when it happens suddenly. With 2014 in full swing, consider making your finances a priority to get out of debt and start saving money for the future. Here are a few tips to get a handle on your finances again:
Assess Your Situation
Many people don’t know how bad their financial situation is, even if they are aware they have debt. If you do not know how much debt you actually have, you cannot create an effective plan for paying it off. Now is the time to come face-to-face with the money that you owe and create reasonable goals. Take some time to make spreadsheets or other documents with all the details about what you have in your bank accounts, and exactly how much debt you have. Looking at the numbers in a spreadsheet will help you understand where you are at financially, which will help you determine what steps you need to take to pay off your debt.
Start Paying Debts With The Highest Interest Rate
The most common reason for staying in debt and having finances spiral out of control is high interest rates. Take a look at your credit cards and start first by paying off debts that have the highest interest rate to avoid owing much more than you can handle. Pay off debts with the lowest interest rates last, since you won’t get charged as much over time. It’s important to take a look at where you owe the most money as well. It may be more beneficial to pay of credit cards with a lower interest rate first if you have a lot more money to pay off.
Work with a Professional
Trying to tackle tremendous amounts of debt by yourself can be quite frustrating, and you might never find a resolution to the problem. Instead of getting yourself into a financial situation you can’t handle, work with a professional, suggests A C Waring & Associates Inc. They can help you create a practical plan for paying off your debt. Considering a consumer proposal is a common and effective alternative to filing bankruptcy. Don’t hesitate to talk to someone about your financial situation to help you get out of debt quicker.
Save a Little
People often debate as to whether they should pay off all of their debt and then start saving, or if they should do both at the same time. While this choice is a personal one, having some actual cash available in case of emergencies is always a wise idea. Create a budget to determine how much money you can really afford to save on a monthly basis while still paying off your debt. No matter your income, it is wise to have a savings of at least three months worth of pay checks to help you in any financial emergency. This will give you time to still pay your normal bills, while searching for another job if you were laid off. Having a solid savings will help you to avoid debt in the future as well.
Don’t Charge Purchases
If you continue to put charges onto your credit card, you are never going to pay off all of the debt. In the event that you put something on your card to earn points, you need to pay it off immediately on that same day, or you will end up in an even more desperate situation. Consider using cash only as an alternative to pay for groceries and other every-day items. Only take a certain amount with you on your shopping days to avoid overspending.
It is possible to be debt free with diligence and understanding of your financial situation. Follow these tips to get out of debt and start saving money again.