Looking at your household budget, you will notice that you have a lot of debt accounts on the expense side that you are trying to pay off religiously.You are not alone because a lot of consumers across the country are going through the same thing. It might not be the same exact amount but they deal with almost the same type of obligations in their budget.
A lot of people believes that aggressive debt payment is the key to rid themselves of their big financial obligations and live debt free. This is actually a great idea but one that needs careful planning. Jumping and starting this without any forward planning could lead to more financial problems down the road like missing payments on other accounts and accumulating interest and penalties.
This is similar with how some people who wish to lose weight and gain muscles just head on out to the nearest gym and sign up. They then proceed to just lift everything they see and follow what other people are doing. This can lead to accidents and getting tired for no reason because they did not plan for it with a program.
They also need to know the common problem areas and have a plan how to attack it with the right exercises. This goes the same with financial planning because having an idea on the most common debt accounts that plague the budget can help you prepare for it. It is better to know what you and your finances are facing to know the program to address them .
The problem is that there are people who just goes ahead and starts off the latest financial advice that they read or hear of without thinking if it will work for their current situation. There are no two budgets that are exactly the same. But knowing the most common ones you will encounter can help you plan.
Most common financial obligations
When you are putting together your budget, here are common accounts that you will see on your expense side and some tips on how to handle payment of each loan type.
- Student loans. Higher education comes at a cost but Businessinsider.com shares that the overall student loan amount is already at $1.3 trillion. This amount has led to a lot of fresh graduates with a lot more debt under their name even before they have found work. They are already in the red before their first paycheck comes in. One of the things that student loan borrowers is to consolidate their student loans and apply for a repayment program with the lowest monthly payment. This can help you meet the payment amount every month and still have a few more to address other budget expenses.
- Mortgage loan. One of the most common debt accounts that you will see in your budget would be payment for your mortgage loan. This can easily be the one that has the highest monthly payment among all your monthly financial obligations. For most consumers, they make it a point to check out ways to lower down their mortgage payments. They can either look to refinance with a lender with lower interest rates or ask their lenders it they can lower their rate on the house. Some looks for ways to try and lower down their escrow payment by understanding as much as they can with their insurance and tax payments to try and reduce payment amount.
- Credit card debt. This is one debt amount that you would often see in your budget even after you have paid off the last month’s balance. This is because consumers keep on using credit cards to purchase items every month. One way people deal with this is to ask their lenders to lower down their rate if they know that they have the credit score to back it up. Some also consolidate credit card debt to take control of multiple payment. There are some who close some accounts to manage their cards but be careful because credit history plays a big part on your credit score.
- Car loan. This is again one of the most common debt accounts that you will encounter in your budget. Getting to and from work or even getting the kids to school everyday would require you to take out a car loan to have the wheels to move around. What most people do is get second-hand cars to save on purchase cost. You do have to balance this with the mileage and the immediate and potential repairs you will need to make. Once you have the car, you need to remember that prevention is better than cure which means being proactive with car maintenance to make sure it is running smoothly.
Getting your finances in order
A good way to address and pay for the most common debt accounts is to get your finances and budget in order. Here are some of the way you can do that.
- Get your budget in order. It all starts with your budget. The better it is laid out, the easier you can understand where your money goes. You do not have to make use of the most complicated spreadsheet because it might just confuse you and get you to overlook some areas of your budget. You can start with a simple list of writing down all your income sources and amount on one side and writing down a detailed expense on the other.
- Know your priorities. While some consumers would put in all extra funds into paying down loans, another idea is to work on your problem areas according to Forbes.com. If you are low on emergency fund, work on it. If you seem to rack up useless card purchases, address the problem. The idea is to address the problems early on before they become full blown financial disasters.
- Have a goal to aspire for. It is a good idea to have a savings goal for your finances. It keeps you focused with your financial task. Just like exercising, you need to have a goal whether it may be weight loss or you want to add muscle mass or both. Identifying your goal helps shape your actions today so you can reach your goals in the future.
- Learn to enjoy life. If you do not give yourself room to enjoy and have fun with family and friends, you might miss out on important occasions and grow up with a distant relationship from them. Try to be make it a point to spend time with people in your life. Just remember that you do not have to bust out your emergency fund just to be with them. Look for cost-friendly activities or if you are planning something big, save up for it.
You need to understand that there are common debt accounts across budgets of American consumers that you would have to deal with sooner or later. Knowing these financial obligations can help you prepare for them better and plan your spending around the payments. There are plenty of ways to deal with each specific obligation but you also need to remember that there are still other types of loans that you will encounter as you go along.