How To Set Up A Debt Repayment Strategy
Debt repayment is not as hard as it sounds, especially when you have a solid plan. Planning for your debt repayment process is equally as important as execution. You can’t just wake up and clear all your debt in one go unless you have all the money and in that case, you don’t need to be reading this. When you have a solid plan set for your debt repayment strategy, you are ten steps ahead.
Debt repayment plan doesn’t just exist to make sure you pay your debt, it also helps you stay motivated and goal-oriented. When you have a plan, you have a goal to reach and this motivation ensures you get results fast! There are steps you can take to set up a debt repayment strategy that is effective and will have you out of debt in no time.
1. List Your Debts
The first step is to list all your debts. Whether it’s credit cards, mortgage payments or loans, list them all together. Also, note down the minimum monthly payment required and the total amount you owe. This helps you keep track of your financial records and prevents you from forgetting any potential high-interest debts that may cost you in the future.
2. Arrange And Rank Your Debts
The easiest way to do this is by arranging your debts first, each with information on the total amount, the interest rates and the minimum required payment. After doing this, decide on how you want to pay off your debts and rank them in that order. There are several ways to do so. Some people often choose to start off with the smallest debts and clear them until they are only left with large debts. Other people often prefer to tackle high-interest debts first. It’s important to understand all your options before choosing the best repayment strategy for you.
3. Generate Extra Income
Extra income may be the form of a side business, part-time jobe or even taking overtime at your current job. The extra money you make can come a long way in helping you repay debt. You also need to spend less money on luxury items you do not need and direct that money towards your debt repayment plan. The best way to pay off debt quickly is to ensure that all extra money is used for your debt only.
4. One Debt At A Time
A good strategy to implement when paying off your debt is focusing on one debt at a time. This helps you keep track of your debts and eliminate them fast. This doesn’t mean neglecting all your debts, it just means paying off the minimum amount on all your other debts and focusing on fast and move to the next one, and in no time you’d have completely taken yourself out of debt.
Remember that all this is impossible without determination and hard work. Consider setting money aside for an emergency fund. Emergency funds prevent you from using your credit cards in the event of an emergency. Also, use cash only for purchasing things and avoid spending money on things you do not need. Debt repayment is only as fast as you want to be and if you follow these steps, you’ll be out of debt in no time.