Debt relief is not simple. Keeping up with monthly expenses and saving for a rainy day may sometimes be a struggle, let alone paying the minimum monthly payment on your credit card. Fortunately, several debt-relief strategies will not make you unhappy. The following are some of the most effective ways for achieving debt freedom in the New Year.
1. Financial Counseling
Credit counseling services are often nonprofit organizations that can assist you in managing your finances and debt. Experienced credit counselors negotiate on your behalf with creditors to develop an affordable debt management plan when it comes to debt repayment. Each month, you’ll make a single lump-sum payment to the credit counseling service, which will split it and distribute it to your creditors on your behalf.
A debt management plan developed with a credit counselor is distinct from debt settlement—credit counseling does not need you to be in default, and the aim is to pay your debts in full.
Try to find platforms that offer debt consolidation. For example, debt consolidation in Calgary, Alberta is a great platform to look into. Credit counseling can equip you with the tools and knowledge necessary to regain control of your finances and build a secure financial future through better debt management—and by avoiding unnecessary debt.
2. Establish a Budget
Before developing a debt repayment plan, you should gather a list of all current payments and debts. Examine your most recent bank and credit card accounts and make a list of any recurring loans, invoices, and other fixed costs.
Your list should contain the monthly payment amount, the total debt, the interest rate, and the period, as well as any other pertinent information. For instance, you should keep track of any debts that are presently deferred or on a special repayment schedule.
Without a budget, you may be unaware that you are spending more than you earn. As tedious as it may seem, budgeting can be an effective strategy for managing your money and preparing for the future. You may establish a budget using software or budgeting applications. You Need a Budget or PocketGuard, but you can also create an efficient one with just a notebook and pen.
Following that, make a list of all of your recurrent, fixed costs. Include rent or mortgage payments, utility expenses, insurance premiums, minimum credit card payments, and food in your budget. Consider how much money you regularly spend on luxuries such as eating out or entertainment.
If you’re spending more than you earn, or if your budget lacks breathing space, search for places where you might minimize expenditures.
3. Boost Your Income
There are just so many ways to save money and eliminate debt. Following creating a budget and eliminating unnecessary spending, your next objective should be to improve your revenue. If a raise or promotion at your full-time work is unlikely, search for methods to generate additional money on the side using your abilities.
Additionally, try adjusting your employer’s tax withholding. If you often get a tax refund, you may have too much money withheld, money that may be used to pay down bills in the meantime. Request a new W-4 form from your employer to complete to minimize your withholding and raise your take-home pay. Alternatively, set aside a portion of your tax return for debt repayment when you get your tax return.
4. Request a Lower Interest Rate from Your Creditor
Increased interest rates keep you in debt longer since a greater portion of your payment is applied to the monthly interest charge rather than the principal sum. However, interest rates are changeable, and you may request a rate reduction from your credit card issuers. Creditors do this at their discretion, which means that clients with a track record of timely payments have a better chance of successfully negotiating reduced rates.
By looking for deals, you may be able to get a reduced interest rate. If you utilize a balance transfer to get a cheaper rate, make a concerted effort to pay off the debt before the promotional rate expires. Your balance will be subject to higher interest rates after the promotional period.
While some of these actions may seem minor—avoiding additional debt and saving for an emergency fund, for example—they are critical for establishing a sound financial foundation that will enable you to repay your debt properly. Tracking your progress along the road helps maintain concentration and serves as a reminder that you are getting closer to your debt payment objective.
