Drowning in Debt?

Here’s a Guide to your Life Float

Being in debt can keep you up at night, especially if you are feeling overwhelmed with monthly payments. Whether it is school loans, credit cards, or car payments, any kind of debt is costing you money. It’s time to make paying off your debt a priority. Once you do that you will find it may be easier than you think. Here’s how to tackle that mountain of debt as quickly as possible.

List Debts by Interest Rate

It’s easy to just pay the monthly payment and not really look at where you are as far as your debt. Take out all or your bills and put them in order from smallest to largest. The next thing to do is to look at the interest rate and list them in order from highest to lowest. Obviously the one with the highest interest rate is costing you the most money, so now you have a starting point.

Have an Emergency Savings Fund

Life happens. Sometimes we don’t have the money to pay for unexpected emergencies. It’s important to set up an emergency fund and pay into it until you have $1,000 saved. Don’t focus as much on your debt at this time (but still make minimum monthly payments) until you have that saved. If you take some out for an emergency, replenish it before focusing on the debt again.

Always Make Minimum Monthly Payments

It’s important to make at least monthly minimum payments on each debt. This will avoid paying late fees and higher interest rates. If you are trying to pay off the highest interest rate card first, put more money towards it while continuing to make the minimum monthly payments on the others. After the highest one is paid off, move onto the next one.

Laddering Your Debts

Once you’ve listed all your debts and have begun paying the highest interest debt, pay as much as you can to that one. Once it’s paid off, use that same amount of money towards the next one and so on. This process will save you the most money over time. You will be able to see the light at the end of the tunnel once you’ve paid off your first debt and the momentum will continue from there.

Transfer Balances

If you are paying outrageous interest rates, transferring your balances can be a great way to save as you are paying down your debt. You can find a low interest personal loan, or lower interest credit cards that take balance transfers.

Reward Yourself

Paying down debt can be a real chore. You may be foregoing many things you enjoy so you can get out of debt. That’s why it’s important to reward yourself when you hit milestones along the way. Every time you pay off a debt, treat yourself to something you enjoy. Don’t pay for it with your credit card though! This will help to encourage you to keep moving forward towards your goal of being debt free. Contact Carolina Money Minders to start your journey towards having no debt!