Debt is a burden that we all carry at some point in our lives. Surveys show that more than half of American adults worry about credit card related debt, but reducing debt doesn’t have to feel like climbing a mountain. Some smart financial decisions today can set you up for a more painless strategy moving forward. If you’re a borrower who has been dealing with debt collectors or is expecting the calls to begin soon, thanks to outstanding bills or credit card balances, then now is the time to get serious about your financial wellbeing.
Debt reduction takes dedication, but it’s completely achievable, no matter what your situation is today.
Start by saving.
Saving is the first and most important step when trying to eliminate debt. Putting money aside is great training for future growth but it’s also an essential piece of tackling your obligations as a debtor. In order to pay down your existing debts, you’ll need to save a portion of your income in order to meet the payments required of you each month. Setting cash aside from each paycheck will help you make your monthly payments, and it will get you in the habit of saving for when your debts reach a more manageable point, allowing you to build wealth instead.
Saving may sound hard, but it only takes one decision to get started. Set aside the extra change in your wallet every week and make a pact with yourself not to touch it. You could also commit to adding a small amount every month to your savings account through a recurring transfer so that you don’t have to actively think about saving.
Consolidate your debts.
Utilizing a private lender, debtors can consolidate their various financial obligations under one loan, in order to make repayment more manageable (see Pacific Private Money at pacificprivatemoney.com for more nuanced information on the benefits of private lenders). The average American has four credit cards in their wallet, meaning four unique due dates, and that’s not including additions for mortgage or rent payments, cable, insurance, electric, and water bills, nor the countless other monthly deductions that your budget has to account for. Combining your revolving credit card debt under one creditor can give you access to a single repayment obligation with a typically favorable interest rate. By borrowing to pay off older, higher interest accounts you can avoid dealing with a collection law firm and the potential legal action that comes with them.
Collections agencies introduce the primary stressor for borrowers trying to make ends meet. The constant phone calls from debt collection agencies and the threat of facing litigation from collections lawyers as a result of your debts will create a real sense of dread. The most efficient way to exit this cycle of debt collection practices is to consolidate your obligations and begin to save the excess. One powerful way that many private money borrowers tackle their finances is to bring each loan under the single private lender and then continue paying only the minimum for the first few months. Instead of four or more minimum payments that can feel as if you are just treading water, you only have to deal with one, lower payment. This gives you some breathing room from debt collection agents, as well as a license to save and start creating positive financial health for yourself. Once you have built a modest savings account, you can start to eat away at the remaining loan. With savings behind you, you won’t have to rely on a credit card for the next contingency expense that comes your way. Instead, you can start to chip away at debts without creating new ones.
Credit health is not a fairytale. Take control of your finances now to kick debt collectors to the curb and continue moving forward with your finances.