5 Tips for Successfully Dealing with Debt

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Few words conjure up as much horror as debt. It is feared and loathed by millions of Americans, and for good reason.

Consider that the average American does not have $1,000 set aside for an emergency – this is an accident waiting for a place to happen. Financial setbacks are an all-too-common occurrence for families and individuals. Your vehicle may suddenly stop working, your AC unit may conk out, or an unexpected medical emergency may crop up.

These nightmare scenarios are not the stuff of sci-fi and horror movies – they are a daily reality that people must contend with. According to multiple studies, people are forced to pay for unexpected expenses by dipping into their savings.

If those savings don’t exist (and they don’t for approximately 60% of Americans), people are forced to finance these expenditures via lines of credit. This takes the form of a personal loan, funds borrowed from friends and family, or credit cards. Either way, it is foolhardy to finance an unexpected expense with a high-interest form of credit.

Daniel Wesley of DebtConsolidation.com penned an interesting article on invaluable money habits. His research and analysis found that Americans tend to be poor at financial management. Consider that the average credit card borrower is $2,859 in arrears and household debt is now approaching the feared and loathed level of almost $13 trillion.

The problem with poor financial management is that it’s akin to a locomotive gathering momentum – it’s virtually impossible to slam on the brakes without all hell breaking loose. The more we spend, the more comfortable we become with spending until a point is reached where the money runs out and the debt burden is too great to bear.

Wesley’s research led him to an even more frightening conclusion. An estimated 50% of American families have no retirement savings available to them at all. Fortunately, it’s not all doom and gloom – there are ways and means to reduce the overall debt burden, and slowly claw your way out of a seemingly bottomless pit.

One of the things that Americans are notorious for wasting money on is coffee. The 2017 research found that 16% of respondents spent $16 + on coffee per week, with a majority of 32% spending between $1 and $5 per week.

While this may be a necessity in terms of improving work performance, it is also an expense item that can be dramatically reduced by drinking coffee at home, or at the office.

 

How Difficult Is It to Make a Budget?

A financial budget is easy to create. Yet despite this, 6/10 Americans don’t even make any effort in this regard.

Consider that the average borrower is in debt to the tune of $42,732 (mortgage debt, automobile loan payments, credit card bills, and student loans) yet there is no budget in place.

This does not bode well for getting out of the proverbial hole. The one good thing about budgeting is that it shows you in a clearly delineated fashion exactly how much money is coming in and how much money is going out.

There is a strategic element associated with budgeting since it determines where your funds must be diverted, and how things are paid for. A good idea for creating a budget is the 50-30-20 method.

20% of your budget must go towards retirement savings, 30% of your budget must go towards discretionary spending, and 50% can go towards the necessities.

Fortunately, the precise categorization of your budget items is easily accomplished by way of software services and budget preparation programs.

 

Here are 5 tips to help reduce your expenses and eventually lead a debt-free life:

  • Get a free copy of your credit report from each of the credit bureaus. This is a complimentary service provider to all folks in the US. The Federal Trade Commission (FTC) is a consumer watchdog organization that ensures that you can get a free copy of your credit report every 12 months from each of the credit reporting agencies. Scrutinize information on your credit report to ensure that you’re correctly being charged for things.

 

  • Get an education in basic finance. It’s important to understand things like APR (annual percentage rate) on personal loans, business loans, and credit cards. It’s also important to understand how to get tax deductions, what credits you may qualify for, and how to lower your overall expenses. The more you know, the better equipped you will be to manage your personal finances and to pay down your debt quickly.

 

  • Consider switching over from a high-interest credit card debt repayment to low-interest credit card debt repayments. There is no reason you should be saddled with high-interest credit card debt when you can apply for a 0% APR credit card and transfer the funds to remove your high-interest debt repayments every month.

 

  • You may wish to consider debt consolidation options to repay high-interest debt. With debt consolidation, you are applying for a third-party loan to pay down your credit card debt. The loan comes at an interest rate less than the interest you’re paying on your credit cards – another money-saving option.

 

  • Seek professional advice if your debt burden is becoming untenable. Don’t wait for the roof and the walls to cave in on you before you look for an out. You may be able to enjoy debt settlement, debt management, or debt forgiveness options if you approach your creditors in the right way.

What tips can you share to deal with debt and pay it off faster?

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