3 Strategies for Managing Debt

Posted August 16, 2021 by in Lifestyle

Many Americans struggle to overcome debt, whether it’s from student loans, credit cards, medical bills, or other charges. Debt can quickly overtake your life, and even if you manage to make your monthly payments, your budget could be completely consumed by all your obligations. From mortgages to car loans, when your outstanding balances become too much, you have to start looking for strategic ways to make them easier to handle.

Most people don’t have the ability to simply downsize and reduce their costs enough to pay off debt. This means there have to be alternatives that make life easier instead of even more constricted.

Consider these three common debt relief strategies as you work on your financial health:

Address Your Biggest Burdens

Prioritize your debt to determine which ones are costing you the most, both monthly and over time. Certain bills may seem more manageable than others until you realize the interest and associated fees will keep you paying for years with little progress. Student loans are one of the biggest and most long-term forms of debt adults struggle with. Rather than struggle to keep up with payments that drain your income, consider refinancing or consolidation.

Refinancing your student loans with a private lender can help lift monthly income and create more room in your budget. When you list your debts, you should include how much you stand to owe by the end of the payment agreement as well as how much you’ve paid so far. This will help you get a better idea of which ones you should focus on paying off as soon as possible.

Stop Perpetuating Debt

Once you fall into debt, it’s hard to get out. Your financial options become more limited, and you may wind up racking up more bills just to stay afloat. Find ways to close credit cards you don’t use without harming your score, and curb back on charging them as much as possible. Consider your credit cards extensions of your own budget, not alternatives to a lack of income. Impulse spending can be a huge factor that contributes to debt. Sure you may want to purchase chic décor items for your home, but think about how a throw pillow here, and a new set of towels there can add up quickly.

Even if you borrow some to pay off necessities, like gas or groceries, you should factor the total into your earnings so you can pay on time the next month. You may also consider freezing your credit. This stops you from being able to apply for any new cards if you find yourself always being tempted to sign up for a new store card. It is also a useful way to protect yourself against identity theft.

Talk to Your Creditors and Lenders

Don’t let fear of your inability to pay stop you from reaching out to your lenders for assistance. Keep in mind that it is in their best interest that they help you pay off your balance. This means they’re often willing to negotiate interest rates and payment timelines if they are more likely to get what they’re owed. Rather than skip payments or cripple yourself with bills you can’t really afford, ask about your options.

You can also look online for free credit coaching to have a professional guide you. They can work with you one-on-one to come up with a debt relief strategy and even negotiate with lenders on your behalf.

*Photo by Mikhail Nilov