Constantly drowning in debt is going to take a serious toll on your mental and psychological health. While getting rid of debt often feels like an insurmountable challenge, it can be done with the right plan and a little bit of motivation. Here are five simple ways you can erase your family debt and take control of your finances.
Create a Comprehensive Budget
Before you consider any of your options, you must first create a clear and comprehensive budget that includes exact numbers for your current income and how much you are spending each month. You also need to go through all of your credit cards and loans to see exactly how much you owe on each account and their current interest rates.
One of the most common ways to get a handle on debt is to consolidate all of the balances into a single account with one monthly payment. If your debt is not completely overwhelming, then you might be able to transfer it all to a single low-interest credit card. Some people also use low-interest personal loans as a way to consolidate all of their debt.
Tackle the Highest Interest Rates
Those who have more debt might not have the option of applying for a loan or transferring all of their debt to a single credit card. When that is the case, you need to start chipping away at the accounts with the highest interest rates. Most experts agree that paying off the balances with the highest interest rates first is the most economical way to get rid of debt.
A Look at Bankruptcy
There may come a point when you need to consider filing for bankruptcy. While that is a very big decision to make, those who can’t catch up on their bills should speak with a bankruptcy lawyer. You will initially have a blemish on your credit score, but a bankruptcy could help you get back on your feet within just a few years.
No matter what strategy you use to get rid of your debt, you should always continue to negotiate. Debt collectors, credit card companies, and lenders want to get their money back, and they might work with you as long as you are honest, straightforward, and consistent.
As you continue to chip away at your debt, you must keep a close eye on your credit score. Erasing your debt is a complex process, and it is all too easy to start damaging your credit score by missing the occasional payment or forgetting about one of your loans.
What have you done to reduce family debt so far?