For a lot of us, being debt free is a rarity. Most of us have difficult financial situations to get out of, such as a credit card or a mortgage to pay, as well as other debts like student loans. So how can we find ways to build up our wealth and focus on our financial goals without it impacting negatively on our overall debt which will leave us swimming in a continuous cycle of ill finances?
Prioritizing Your Debt
This will be the key to addressing every aspect of your outstanding balance. You need to evaluate each aspect of your debt to determine what type of debt you have, such as whether it is “good debt” or “bad debt.” Good debt could be something like a loan for starting up a business. So you need to ask yourself if the debt is good or bad by determining if the debt is temporary and if it is worth it.
There are many ways for you to consolidate your debt now, and this includes things like getting a balance transfer to pay off your credit cards or a debt consolidation loan. But getting the right loan opens up a myriad of questions too. There are so many different options available from balance transfers to long term or short term loans, so which one is best for you? The way to answer this question is to calculate the interest rates for each option and compare this with the repayment terms. If you can get a 0% offer for a long period of time, this will be a good option as you will be paying so much less in the long run.
Paying Your Biggest Debts First
Every item of debt is difficult in one way, shape, or form, but one of the best ways to tackle this issue is to pay off the most pressing debts or the most painful ones. For a lot of us, it’s not necessarily the largest amount of debt that requires immediate payment, it could be a loan from a family member that has been weighing heavy on your mind for many years, so it may make a lot more sense to pay that off first before something like your credit card. A big motivating factor in paying off debt could be to personalize it, and it can be a big weight off your shoulders meaning you are approaching the rest of your debts with a fresh mind.
Don’t Add To Your Debt!
This is probably the biggest life lesson for all of us. You may feel a sense of accomplishment by paying off your credit cards and loans. But if you don’t change your spending habits then you will get back into the habit of accumulating debt, so you need to avoid the most common mistakes that will keep you in said debt, which includes your attitude towards money.
It is possible for us to live a good life without mounting debts. But as long as you have a plan in place for what you are going to do with the money you save once your debts have been paid off, like setting up standing orders for money to go into savings, you are beginning to readdress your whole attitude towards how you spend and how you tackle it.