FDIC-Insured – Backed by the full faith and credit of the U.S. Government6 Steps to Take Charge of Your Debt
| Posted in Bank Blogs
Credit has become a part of our everyday lives. When used properly, it’s a powerful tool that can help you realize your goals like earning a degree or buying a home. But, when you use credit to purchase things you can’t afford, it can weigh down your budget and lead to sleeplessness, stress, and health issues.
If you feel burdened by credit card or other debt – or want to avoid debt in the future – there are some smart steps you can take:
1. Know who and what you owe. The first rule of managing debt is knowing the type and amount of debt you have. For example, you may have a mortgage, student loans, and car payments. Record your outstanding balances, the interest rate charged, your monthly payments, and the remaining term on your loans. If you have credit card debt, know the balances you owe and the interest rates.
2. Create a monthly budget. A monthly budget is critical to managing debt and achieving financial success. To create your budget, use online banking, your checking account statement, or a budgeting software/app to view your monthly expenses and income. Once you know your expenses, categorize them by “needs” and “wants.” Needs include your mortgage, rent, or utilities while wants include discretionary purchases, such as subscription services or vacations. Go through your wants and determine things you can do without and use the money you’ve freed up to pay down your debt.
3. Set your debt payment strategy. One such approach involves paying down your higher-interest debt first. Another option is to pay off the smallest debt you have first. Whichever option you choose, stick to your debt payment plan.
4. Put your credit cards on ice. As you work on paying down your debt, be careful not to run up new debt. If you use your credit card to pay for everyday expenses, pay off the amounts you charge. Remember the simple rule: Don’t charge anything you can’t afford to pay for in cash.
5. Make your payments on time. Late payments can cost you – either in higher interest rates, costly fees, or both. So, make payments on time, every time.
6. Consolidate higher-interest debt. Another option for paying off your debt is to consolidate higher-interest debt with a balance transfer offer. Just be careful not to run up debt on credit cards you pay off.
Stay the course
Getting your debt under control may seem difficult, but if you stay committed to your plan, you can do it!