Lessening or relieving yourself personal debt should be your goal if you have succumbed to financial fatigue. Trying to find a practical solution is often a challenging task but certainly not impossible. The following pointers can certainly aid with lightening your financial burden…
1. Compile a list of your debtors
It is important to compile a list of all your debtors. One of the highest causes of personal debt in most countries (besides mortgages) is credit card debt. Therefore be sure you gather information regarding all areas of your debt.
If you are committed and have a well-thought out budgeting strategy from the start, you are likely to persevere long-term and adhere to your monthly commitments.
3. Payment Strategy Options
There are various options to choose from. You can either opt to pay off debts which attract the highest interest rate first, whilst continuing to make minimum payments on your remaining debts. Although this may seem the least attractive option, it will save you in the long-run by eliminating unnecessary interest payments.
Alternatively, pay off your lowest debts first, then work your way up to eliminating your largest debt payments.
It may feel as though you aren’t making progress, however, once you eliminate your highest debt, you will have reduce a large amount of pressure on yourself and the rest will come easier.
Never reduce your highest payments. Continue contributing as much as your budget allows each month.
4. Never Borrow More than You Earn
We are taught that a certain amount of debt will benefit us later in life, as it is advantageous when requesting a loan if we have a good credit rating. This is all very well providing you have control over our finances and do not get sucked in by the debt whirlpool.
It is therefore imperative that you pay your credit card balance on time and in full each month. You attract little or no interest by doing so. Check your credit card statement for the interest rate, then use our free online ‘credit card calculator’ to work out what interest is being accrued each month.
Remember: If you cannot afford a brand new car, rather opt for a second hand or demo model.
5. Debit Cards
Debit cards reduce the risk of getting into debt, as you are limited to the amount of funds available in your account. Most debit cards allow for a low overdraft amount, however, the interest rates are generally high.
At the end of each month, transfer every bit you can into an investment or separate ‘savings’ account (preferably one with no or minimal monthly fees – look around!).