Women Wealth & Wisdom
Dealing With Debt
The obvious first step when it comes to debt reduction is an honest assessment of your income and your expenses. If you are spending more than you earn, then something has to change. You can either take a second job as a means to earn more income, or you can reduce your spending to fit a realistic budget.
If you have debt, there are steps you can take to reduce your payments and take control of your finances. There are two main schools of thought when it comes to repayment, you can choose the model that works best for you.
One possible strategy is a payment rollover approach that begins with paying your smallest debt first. While maintaining all your monthly minimum payments, prioritize putting as much as you can afford on your smallest loan until it is paid. Once accomplished, put the same amount that you had been paying on the first debt and compound it with the minimum you are paying on your second smallest debt and pay that at the larger rate until finished. Continue paying it forward, rolling over the payment amounts until you are concentrating all your efforts on your largest debt.
Another school of thought recommends paying your most expensive debt first. If you are paying 18% on a credit card debt that is bigger than a personal debt that costs only 5%, then it makes sense to pay the higher charged debt first, as it will cost you less in the long run.
You should also be putting something towards your savings each month. This figure should be calculated into the monthly expenses along with debt payments. You should always maintain your minimum payments to avoid penalty and protect your credit score. If this is unmanageable, you can consult a debt counselor for advice, or contact your creditors and discuss your options.