Recent developments in banking have made it possible to manage your debt much more effectively than ever before. With tools such as credit cards with rewards, easy loan applications, and flexible payment plans, you can find yourself moving forward instead of falling further behind!
There’s no doubt that credit card loans and reward programs offer substantial benefits to efficient spending. However, there is also a dark side to them if not used responsibly.
Too many people use these services for unnecessary luxuries which can set back onto track their financial health. Unfortunately, too often we see stories of overspenders who rack up substantial balances due to rewards program purchases or individuals who spend heavily during times of reward credit card usage.
This article will go into detail about some strategies to help you tackle your debt. Many of these tips apply whether you are just beginning to pay off debt or you are struggling to stay on top of things.
Blanket statements don’t tell us much
One important thing you should be aware of when trying to reduce debt is what information you receive in your monthly statement.
Most creditors give you very little information beyond a few numbers indicating how much money you owe and when payments are due. They may include an explanation of why you are being charged interest, but this is usually only for the highest balance owed.
Make a budget that reflects your current situation
It’s important to remember that this doesn’t have to be an all-encompassing, perfect budget. Rather, it can be more of a “we should do these things” kind of thing.
You don’t need to pay off every debt right away, but you will want to work towards that at least monthly.
And while it is okay to spend some money, you shouldn’t go beyond your means too much without knowing where the next dollar comes from.
A good way to make sure this happens is by establishing a budget. This can be done via notebook or spreadsheet, whatever you feel most comfortable with.
Don’t worry about having everything perfectly organized just yet – instead, try writing down what you spend each day and then making a note of how much money you have left at the end of the week.
Track your spending
The next step in managing debt is to figure out where your money is going. Are you spending more than what you have in savings?
You should be aware of how much you spend every day, even if you don’t see an increase for one week or two weeks. It can easily add up when multiplied over months and years.
Track everything – from big purchases (like a house) to small ones (such as groceries). Don’t forget to include things like monthly bills that you may not consider regular expenses.
Many people begin to spend more once they feel their financial cushion has been sapped due to all of their debts. Make sure to check into this!
Another way to track your spending is using a free online budgeting tool. There are many available, some better than others. Try looking through our list here!
Once you get the basic numbers under control, you can start thinking about ways to improve your credit score.
Set up a plan to pay off debt
The next step in managing your debt is figuring out how to tackle it! While some credit card companies offer special programs that help you get rid of their cards, most do not have such services.
That’s why it is important to start building an efficient payment strategy. This can include having multiple sources of income, staying within your budget, and using tools and applications to facilitate tracking and keeping track of payments.
By establishing these habits now, you will ensure that you don’t make costly mistakes later on.
Consider the balance of interest and penalties
Another way to determine if you can pay off your debt in full is by looking at how much money you would need to make to do so. You should look not only at the cost of paying off all debts, but also what fees and interests you would have to pay while doing so!
It’s very important to note that most credit card companies will charge heavy yearly finance charges for people who are able to stay within their limit as well as additional monthly service fees. It’s best to be aware of these before they add up!
By knowing how much money you spend every month it helps to keep track of whether or not you can afford to pay off your debt. Many times, people feel compelled to continue spending because they think they cannot afford to live without expensive things.
It’s easy to get discouraged when it seems like there is no way out of debt.
But you have to remember that you are still in control here! You are in charge of your money, not someone else.
Never give up. Even if you think everything is lost, you are still in control of yourself.
You can choose to stay sober for one day or twenty, we all know what choice will make us feel better. So why would you drink alcohol even once?
Stay motivated by creating a reminder about how you will benefit from staying in control. For example, a picture or sentence that says “I will save my money tomorrow” or “This is my chance to get out of debt”.
By using reminders, you increase your chances of sticking to your budgeting rules. Also, keep track of your debts and savings so you do not lose motivation.
Monitor your credit
It’s very important to keep an eye on your credit because things can quickly spiral out of control if you don’t. While it’s tempting to ignore your bad credit scores, this can have disastrous consequences in the long run.
If you find that your credit has hit its low point, try to determine what caused it and address those issues immediately!
It may be helpful to take a look at some of the tips we wrote about earlier so that you are able to recognize potential warning signs as well as strategies for improving your credit.
Once again, staying motivated is the most difficult part. Make sure that you understand why changing your lifestyle will help you improve your credit and make smart decisions with money, but also remind yourself of the rewards that you want to see happen.
Pay more than the minimum payment
Another way to stay afloat is to pay more than the minimum payment for your creditors. This can be done in two ways. The first is to make a lower monthly payment, which may require larger payments at times!
The second way to do this is to only put down a small amount of money every month towards paying off debt. In fact, you could even spend nothing at all if you wanted to!
This is called zero balance living or sometimes referred to as budgeting. By doing this, your credit card companies will reward you by offering higher interest rates because you have shown that you can handle your finances well.
They will also consider you more likely to keep up with repayments since you don’t seem to be trying very hard to avoid them. It is not recommended to use this strategy unless you know how to manage your money well.
Pay more than the minimum payment until you have paid off the balance
The best way to manage your credit card debt is to pay more than the monthly minimum payment until all of your accounts are in good order. This will take longer, but it’s the most effective way to get rid of debt.
Most creditors offer several different interest rate schemes depending on how much money you owe them. Some may even give you a starting period where they don’t charge any additional fees while you bring down the balance (this is usually for up to twelve months).
After this initial period, however, their normal rates apply which can be far higher than before. By paying more than the minimum for a few years, you’ll end up paying less overall!
Some people believe that making the minimum payment every month is the better option, but we think this is misguidedly focused on the short term instead of the long one. A lower monthly payment might seem like a smart move at first, but in fact it could make your situation worse later.