If you have found yourself stuck in a rut with way too much debt than you ever planned for, don’t worry, you are not alone. This is a common situation that most Americans face, and there is a multitude of ways to combat this seemingly inescapable scenario.
First, you need to assess what kind of debt you have. Credit card debt is the most popular kind of debt, which unfortunately commonly has an interest rate in the teens at any given time. Credit card debt is something that should make you step back and see what you are spending your money on. Writing down everything you spend and cutting back on things you don’t need will help you to get back on your feet. Keeping those high interest rates in mind, be sure to pay off your highest-rate debts first. Of course, this is so you can get rid of that debt and be able to save on the interest rate. This is a key to paying off debt efficiently, and you can think of it as a prioritized to-do list; once you’re done with the highest, move on to tackle the next.
Although debt sounds like it’s the end of the world, surprisingly, some debt is actually good. It makes sense to borrow for a home or for a college fund rather than missing an opportunity, but look around for the best rates before committing.
Things that you consume on a daily basis are the purchases that can add up, and fast. Meals, vacations and outings with friends are the sort of credit card charges that will get you in trouble if you can’t pay them off in full within a month or two. Saving for splurges you really want before going ahead and getting them are best for your debt’s sake.
Lastly, be careful where you borrow. It may sound appealing to borrow from your 401(k) savings, but you could later regret falling short of your investing once its time for retirement. If you need outside help, there are reputable debt counseling agencies that may be able to consolidate your debt and help you to develop better financial management skills.