When living on a tight budget it, can be easy to resort to credit to get by on a daily basis. It is also easy to take this road when you lose your job, or suffer a catastrophic loss that causes significant debt to accumulate. The problem with living on credit is that if even small balances are not paid in full each month you can soon find yourself in deep debt. Managing your debt in a way that works can help you get out of debt faster, freeing up your money for other things.
If you are able to make a plan to repay your debt, it is important to come up with a method of debt management that works for your budget. A few methods that work equally well include:
- The snowball method: the idea here is to pay off the highest rate debt first, and then use the monthly payment for that debt to add to the payment being made on the next highest rate debt.
- Smallest first: if you are able to pay off a small debt all at once, do that even if the rate is lower than some of your other debt. Once the small debt is paid off you can turn your focus to the higher rate debts.
- The stacking method: this involves making minimum payments on all debt except the one with the highest rate of interest, and putting all extra money towards that highest rate debt. Once it is paid off, you then shift your focus to the next highest rate loan.
Most people use one of these methods alone, or together. It is critical that you find the method that works best to you and then stay on track. You can reward yourself along the way with small treats when you reach a goal. Keeping track of your goals and the rewards you give yourself as each goal is met will help you stay on track. We can help you decide which method works for you, and come up with a plan that will allow you to stick to that plan. Once you start a plan, it will soon become your lifestyle. And, before you know it you can be on the road to financial recovery and freedom.
If you have questions about debt management and budgets, call our office for answers. We have experience helping people with their finances and are here to help you too. Call a Bloomington, Minnesota bankruptcy attorney and schedule an appointment today.