Set up a repayment plan to get out of debt
Have you incurred debt? Do not worry because owing money is not criminal offense but you need to think of ways of repaying it.
To this, experts say you should set up a repayment plan to get out of your debt. They believe that paying off debt and investing for the future are essential elements of a healthy financial life.
Once you have decided that you want to get out of debt you need to set up a debt payment plan. It is important to realise that by applying your extra money to one debt at time, you will significantly speed up the debt repayment process. If you work hard you will be surprised at how quickly you can pay off your debt, Miriam Caldwell, personal finance specialist has said.
First, you need to make a list of all the debt that you have. Your list should include the minimum payment amount, the interest rate and how much you owe.
Second, you will need to rank your debts in the order that you want to pay them off. Some experts recommend going from smallest to largest, since this helps to get the momentum going. Others recommend listing the debts from the highest to the lowest interest rate, since this will save you the most money.
Third, you will need to decide how much extra money you have a month to pay towards your debt. You may need to cut back spending in other areas so that you have the money to put towards your debt repayment plan. You may also decide to take on a part-time job or to pick up overtime hours. You can also sell items to earn extra money for your debt payment plan. Additionally, you may want to apply all the money you receive from gifts, bonuses or tax returns to your debt.
Fourth, pay all the extra money on the first debt on your list, while paying the minimum on all other payments. Once you have paid it off move to next debt on your list, paying the extra plus the current minimum payment. Continue to do this until you have crossed all the items off of your list.
Fifth, put most of the extra money you now have into savings. Soon your money will begin to work for you. Make sure that you cut up and cancel your credit cards as you finish. That way you will never need to do this again.
Erin Huffstetler, expert in frugal living said, “We all benefit from the occasional windfall, whether it’s a work bonus, a tax return or something else entirely. Vow to turn your bonus money into bonus debt repayments, and fear those credit card statements a little less.”