Sometimes you don’t even know how you got here, how you let your credit turn into overwhelming debt. Yet here you are. Don’t worry, many Americans are in the exact same spot. That’s the tricky thing about debt --- it accumulates quickly but can take a very long time to pay off. If you wake up one day and find yourself with more debt than you can afford to pay off, you have options for getting back on track.
Ginger Latte is the creator of the popular website Girls Just Wanna Have Funds, and she helps people create actionable and practical plans so they can break financial ceilings. Doesn’t that sound nice?!
Here are some tips to help avoid letting your debt obligations get out of control:
Make a budget and stick to it
One of the many ways people get overwhelmed by debt is by mismanaging their budget. If you’re overspending on living expenses there won’t be enough money at the end of the month to pay off your credit balances.
Unpaid balances can quickly add up and become large outstanding balances that continue to grow every month thanks to late fees, new purchases and interest charges. Before you know it your debt gets so out of control that you can’t even afford to make the minimum monthly payments, let alone pay off the full balance.
The theory of a budget is nice but it’s really the practice of committing to spending limits that helps you stay on track. Set your spending amounts at the beginning of each month and track your purchases throughout the month to ensure you aren’t overspending.
Make cuts if you have to
If you suddenly find yourself with overwhelming debt just take a step back and sort out the financials. Using a budget software tool such as Mint.com will help you spot patterns in your spending, see where you’re overspending and find where you need to make cuts. When you make cuts in one area of your spending you can reallocate that money towards repaying your debts.
According to Mint, 50% of your income should be allocated toward fixed expenses, i.e. living expenses, 30% toward variable expenses such as debt repayment and 20% of your income should be allocated toward savings.
Keep up with your payments
Ginger Latte says that overwhelming debt is “not being able to make the minimum payments and maxing out all credit cards.” Does that sound like your current situation?
Here’s a little secret to debt --- paying off credit balances in full every month is ideal for avoiding amassing overwhelming debt. However if that’s not possible, then making the minimum payments will help keep your credit score in good standing, because at the end of the day, minimum payments are better than no payments.
Consider all your options
If you want to start paying off your debt, you have to know your options. You can create a budget and set up automatic payments for your recurring bills and credit card payments. This helps ensure you are continuously making payments and your debt will eventually get paid off.
If you’re overwhelmed and can’t do it alone, that’s OK; we’re here to help. Credit counseling can be a good option. Our professionals will help you develop a workable budget, bundle debt into one manageable payment and get on your feet again.
Call us now at 1-888-919-CESI for your free credit consultation and join over 300,000 Americans who got the help they need.
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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
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