It’s a word many Americans, perhaps even you, know too well. You may also know the weight debt brings to your life day after day, how it can seep into every part of your life. Living with credit card and loan debt can feel like a never ending spiral.
However, you can change that feeling starting today by creating a debt action plan. This plan will help you identify how much debt you have, how much money you can allocate toward paying it down and which debts to attack first. Give the following a read and start working your way out of debt today.
- Know how much you owe. Organize all of your credit card and loan statements – on paper or online – and add up the total amount you owe. Be sure to note interest rates and APRs (annual percentage rates) next to each debt.
- Know how much you have. How much income do you receive each month? Tally up all of your income so you know how much money you have to work with.
- Know your total monthly household expenses. Add up all of your expenses. Be sure to include a little wiggle room in case of emergency.
- Know how much you can afford to pay. Use the following formula to determine how much money you have to put toward debt payments: household income – household expenses = balance. Your balance is what you can use to start paying down your debt.
Which debt should you pay first?
Once you know what money you have to work with for debt repayment, you need to determine which debt to attack first. If you have credit card and various loan debts, it can be hard to know for sure. Here are a few things to consider:
- Which debts have the highest interest rates? Starting with these debts mean you pay less over time in interest.
- Which accounts are above 50 percent of their credit limit? Lower your credit usage per account can have a positive effect on your credit score.
- Which debts are close to being paid off? If you need a quick win to give you motivation, attack the debts that are closest to being paid off to get them off your plate.
You don’t have to let debt hang over you and your family. By using the above tips to have a plan of attack for your credit card and loan debt, you can begin to take the burden debt carries off of your shoulders.
Don’t forget to reach out Security State Bank to see how we can help as well!
Security State Bank, Member FDIC