No matter where you are in your walk of life, your debt has gotten out of control one way or another. If you’re one of the lucky ones and have managed to get by without having large amounts of debt, then consider this article a way to plan for the worst. If you follow these steps precisely, then you can and will have four ways to get your debt under control.
Step 1. Stop Spending and Start Saving
The reason you got into this position in the first place is because you were doing more spending than saving, or spending beyond your means. Stop using your credit cards to fund your entertainment expenses. No more financing new furniture. Focus on the debt you currently have and figure out a plan of action to pay it off before you have a major financial crisis.
Please proceed to Step 2.
Step 2. Figure Out a Plan of Action
Organizing your debts is the key to figuring out a way to pay them off. If you don’t know where your money is going and who to pay, then you’ll be digging yourself deeper into the hole. List your bills by the debtor and how much you owe. Once you have double- and triple-checked your list, organize the debt from smallest to largest and, if possible, include the interest rate.
Once your plan of action is complete, proceed to Step 3.
Step 3. The Snowball Plan
The snowball plan is simple: Make minimum payments on all of your debts except for the smallest bill (which is why we made a list earlier). Throw any extra money that you have and pay off that debt completely. Once the smallest debt is paid off, use the minimum payment from that debt to pay off the next smallest bill. That way you’re snowballing your payments, which allow you to pay off your debts more quickly.
For more information on the snowball debt consolidation plan, please visit The Debt Snowball Plan.
Proceed to Step 4.
Step 4. Plan for the Future
By following the snowball plan, you should be completely debt free in less time than you would take trying to make several overpayments to all of the debts at once.
At this point, the best way to keep from having debt issues is to have an emergency fund of $1,000. Most people acquire debt initially because they had an unfortunate emergency that caused them to have to borrow money or finance their way out of the situation. Having emergency money put away for such occasions allows you to the freedom to use your own funds without eventual repercussions. SaveAndInvest.org has a great step-by-step process that shows you exactly how to set aside specifically for your family's emergency fund here.
Those are just "4 Ways to Get your Debt Under Control" and snowball your way to financial freedom. If you have any questions about obtaining your financial freedom and want to seek the help of a certified financial professional, then don’t hesitate to contact us here.