• Tuesday, December 05, 2023
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Debt repayment habit can help you come out of mess


  Wanting to get out of d e b t p r o pels anyone to make changes in their life. Your debt is a testament to the fact that there is something wrong with the way you used to live your life. That means you need to change something to ensure that you will no longer land in the same debt situation again. That can either be a minor or a total turnaround – depending on how much debt you are currently in.

As you embark on your road towards financial freedom you need to do things the right way. That means starting with a plan. Nothing beats proper management techniques in handling your debt. So how do you plan for your debt relief program?

First of all, make a monthly budget. This is not just a simple plotting of income, expenses and debt. You need to analyse where your money goes. Decide which ones should be cut back so you have more to divert to your debt payment fund.

In your expenses list, separate your wants from the needs. As you are doing that, check out any expense that you can remove. For instance, the gym membership that is hardly used can be cancelled. The same goes for the cable subscription that you are not maximizing. Once you have exhausted the savings that you can get from your expenses list, get the total and deduct it from your income. This will be your disposable income – which is the amount that you can use for your debt payments.

When you have accomplished that, proceed with your debt list. Put in writing all of your credit obligations. List how much you need to pay for every month. You need to create a debt payment plan that you can monitor. The goal is to check if your disposable income is enough to pay for your monthly debt obligations.

If the answer is yes, then you can prioritize a couple of debts so you get to finish them faster. Ideally, working on your debts one by one will help you experience success faster. When you have finished paying off one debt, you will get the motivation needed to pay off the rest.

If your disposable income is not enough to cover your monthly debt requirement, research on debt relief programs that you can avail. Your choice will depend on your debt balance and unique financial capabilities. You can also choose to grow your income or sell off some of your assets to add to your disposable income.

As you are doing all of that, make sure you squeeze in your to do list two more tasks. One of them is saving. You need to grow this to create a financial safety net. You never know when a crisis will strike again so it is best to be prepared. The other is keeping the communication open with your creditor. Do not be intimidated and be honest about your financial situation. They will appreciate the fact that you want to honor your debt responsibility so try to negotiate for lower rates or a better payment term for your credit account.