Dealing with High Levels of Consumer Debt
It is no secret that levels of consumer debt are on the rise, while personal savings rates are still hovering near their historic lows. With these kinds of statistics, chances are you know someone who is struggling under the weight of his or her personal debt load. Perhaps this struggling person is even you. While dealing with debt is never easy, it is possible to get a handle on your debt, and climb back to financial freedom.
One of the most important, and most neglected, parts of controlling and eliminating debt is creating and sticking to a realistic monthly budget. Until you have a firm idea of where you money is really going every month, it will be nearly impossible to reduce your spending enough to make a difference in your debt.
You may think you know where your money is going, but seeing it in black and white brings it home like few things can. Simply by listing your expenses in a concrete form, you may be able to spot areas where you can cut back without significantly impacting your life. While everyone should have a budget plan, such a plan is absolutely essential for those struggling with excessive debt.
It is also essential for those with excessive debt to prioritize the repayment of that debt. That means going through the painful but necessary step of listing exactly what you owe, and to whom you owe it. It is important that the list include the interest rate on the debt, the balance, and the required monthly payment.
When prioritizing your debt, it is important to pay it off according to the interest rate. The debt which is incurring the highest interest rate should be paid off first. After that debt has been retired, focus on the next highest interest rate, and so on. If you have extra money, be sure to apply those extra funds to the debt with the highest interest rate, as this will get you the biggest return.
As you pay down your debt, it is just as important to avoid incurring any new debt along the way. It is vital to get a handle on your debt, an to avoid additional indebtedness. If you feel you need help in getting your spending and debt under control, the services of a debt counselor may be a big help.
Dealing with high levels of debt is never easy, but it is essential to providing yourself and your family with a solid and secure financial future. The sooner you start working on your debt load the sooner you will be able to enjoy a debt free lifestyle.