Everyone knows that getting into debt is easy but getting out is difficult. But that does not mean it is impossible to clear your debts and start working towards financial freedom.
In this article, we will look at a few ways you can manage your debt in 2020.
Debt consolidation
A debt consolidation programme is best for consolidating debts because it reduces the interest paid on your account. It combines the loans from the credit card into one regular payment. What this means is that all of your debts (credit cards, loans, bills, mortgages, etc.) are combined into one debt tool. That way, repayments and penalties are no longer scattered all over the place, making it easy to control the debt profile.
Determine and start paying priority debts
There are good debts and debts that can damage your finances, but regardless, it is important that you manage your debt, so that they don’t jeopardise your financial future.
Good debt will ultimately help you to increase your income or accomplish important personal goals, including mortgages. On the other hand, bad debt generally has a high-interest rate and does not carry any major advantage to your financial situation.
Regardless of whether you repay credit cards or take out a mortgage, choose to strategically target your debt in 2020, and you can do this by starting with the critical or priority debts.
Plan your budget
Find out how much you can afford each month. Check your budget to determine how you can free up some money for debt repayment.
Use all your extra money to pay off the main debts on your list. For some people, this will mean delaying some of the common pleasures you enjoy, change of lifestyle, and dropping of certain expenses.
Ultimately, the best way to make use of your budget is to optimise your income and slow down on expenditure. You will then have a lot of extra cash that can go towards clearing some of your debts.
Enrol in a debt management programme
Debt management programs are a problem solver for people who need advice on budgeting and managing their finances.These companies or agencies are mostly non-profit credit counselling firms that work with credit card companies to create a monthly payment schedule that debtors can afford.
You must apply on the basis of your income before you can participate in a debt management plan.
If your debt is too high to pay off with your income, debt restructuring, or bankruptcy may be advised by a financial lawyer. But, if you qualify based on your income, your creditors will still have to follow credit counselling advice.
Take advantage of technology
If you find it difficult to meet your debt obligations, you can make use of technology to automate the process.You can use online tools that allow you to enter all of your debts, choose a repayment schedule and record both regular monthly payments and additional payments.
Some people like making physical representations of their debts or use a debt thermometer chart to signify when a debt is paid.Whatever the option is that you work with, be sure to check after each payment that it has been applied correctly so that your account balance drops.
You can also monitor the impact of debt repayment on your balance using a credit assessment service.
Final thoughts
In 2020, managing and clearing off your debts should be top on your list of priorities. Without a clean plan, you may find it hard to meet your personal finance goals.Therefore, try the tips covered in this article, and see if you will notice an appreciable change in your debt profile this year.