In this article, we discuss strategies that are helpful when controlling your personal debt as well as how you can achieve your financial goals. Additionally, we will also talk about how your personal debt can work for you.
Americans and Credit-Card Debt
An average American home with at least one credit card has as much as $15,950 in credit card debt. This is based on creditcards.com during the year 2012. It was also found that the average interest rates run in the mid to high teens.
Debt Can Be Good
If one is borrowing for a college or home, then this does make good sense. However, you need to make sure of one thing, which is that you do not borrow any more than you will be able to pay back. This can cause problems when controlling your personal debt so must be avoided. You can shop around for the best rates, until you are satisfied, as you will find it much easier when controlling your personal debt.
Debt Can Also Be Bad
Things that are quickly consumed such as vacations and meals should not be paid for using credit cards. This is a serious issue when controlling your personal debt, as you may not be able to pay off your entire monthly bill within a month or two. One can fall into debt very quick, which is why you need to avoid doing this. What you can do instead is put some cash aside every month and pay the bill in full. If you are in a situation where you really want something and find it is too pricey, then you can save for it for a few weeks or even months before purchasing it. This allows you to avoid interest charges and to pay the balance when it is due, and helps when controlling your personal debt.
Handle Your Spending
Regardless of what people buy, they may end up paying thousands of dollars. One thing you must do is note down everywhere your money goes in a month. Once you have the list, you can analyze and cut down on the things you do not need. This is an effective method to controlling your personal debt. It allows you to start saving money that is left over, which you can use to decrease your debt much quicker.
Start Off With Debts That Have High Rates
If you wish to get yourself out of debt proficiently, you need to pay off the balance on loans and credit cards with the highest rate. If you start with paying off the ones with high interest, then you can easily move on to the next highest and remain motivated throughout the process, as there will be less each time. This is another effective strategy when controlling your personal debt.
Do Not Fall Into the Smallest Trap
If you only pay the minimum that is due on the bill of your credit cards, you will hardly cover the interest that you owe. This means it will take you years to pay off the balance, which means you will end up paying thousands of dollars more than what you were initially charged
Where Are You Borrowing?
You need to ensure you keep an accurate eye on where you are borrowing. You may find it appropriate to borrow 401k against your home in order to pay off debt. This; however, can be dangerous. Due to this, you may fall short of investing goals at retirement, or you may even lose your home.
Expect the Unexpected
You need to ensure you have an emergency fund with living expenses, as an emergency can arise unexpectedly. If you do not have an emergency fund in place, then an important task such as a damaged car or broken furnace will surely be an upset to your finances.
Don’t Hurry Paying Off Your Mortgage
If you have a couple of debts, then do not put your entire cash towards your mortgage. The interest rate for mortgage is usually very low when compared to other debts.
If You Need Help, Get It
If you are finding it difficult to manage your debt, you should seek help immediately and before it breaks your back. You will find a variety of counseling agencies that can assist you with consolidating your debt and help you manage your finances better.
It is important for consumers to be on a steady financial ground because if they are not, this could put the country at risk. The fact that Americans are not good savers, does not really help here, which is why people need to be making practical progress with savings. However, Americans have made little progress with debt repayment, but the savings remain the same and are the Achill heel of financial security.
There is still good news. This is that majority of Americans are aware of their dangerous, financial situation. A survey was carried out and showed that Americans are less relaxed about their levels of savings than they have been in a year. Generally, the sense of financial security has also fallen amongst Americans. Inappropriately, this somewhat effects rising economic inequality and quiet wages. However, it also raises awareness amongst Americans that they need to and should be doing better.