Debt management might seem to be a scary prospect for you especially at the beginning of the year. It sounds like something only professionals can undertake. You might get scared to the point that you just let your debts take the backseat. However, doing so would only make them a lot bigger and harder to pay off at the end of the month.
The more you postpone managing your debt payments, the bigger of a problem they become. These financial obligations will only grow bigger over time when left unchecked. The longer you wait to attend to your payments, the harder it becomes. There are a number of fees and penalty payments that add up making it more challenging to pay off.
There are a number of debt payment tips that you can look into to help you face your obligations head on. They can give you the direction you need to meet your debt payments. However, if you are already running behind on your payments, you need a serious debt management plan. This would help you tackle your payments head on.
This might be a good time to think about addressing your debt payments as more people believe the economy is improving. According to a recent survey by Gallup.com, more than 40% of Americans are positive the economy is better than before. Though 36% said it lost ground during past few years, more people are optimistic.
Debt management this year
If you are serious about tackling your debts and managing your repayments, here are a few things to consider. You can take this up on your own by carefully looking at these points.
Admit the problem
As cliche as it may sound, the first step in streamlining your debt payment is to accept that you need it. If you are in denial then this will all be a waste of your time. You need to accept the fact that you are getting behind on your payments. Any more and you could stay in the red for a long time. This can hurt a lot of things such as your credit score, net worth and even your timeline for your long term goals.
Audit your debt problem
After you have accepted the fact that you need some structure with your payments, you now need to audit your financial obligations. Debt management starts with knowing what the problem is. It is quite a difficult task to take on something you do not understand. You need to have a clue of what you need to manage before you even begin.
The easiest way of doing this is coming up with a list of your debt obligations. This can give you a pretty good idea where each of them is coming from. Are they coming from your multiple credit card purchases? Is your debt problem a result of that last minute car purchase that you and your family did not need?
It is a good idea that at this point, you get the total figures as well. You need to look at exactly how much your debt payments are every month. It is also a great eye opener to see how much interest payments are in there. Valuepenguin.com explains that credit cards with great rewards programs usually have higher APR. This helps them make up for those benefits and privileges they give out.
Incorporate the amount in your budget
Your next step is to include that total debt payment amount in your household budget. This is where debt management becomes a little more challenging. You have to find a way to cover the payments with your existing income. The challenge is that in your budget, it is not your only concern. There are other areas in your finances that you have to consider.
One way to a sure budget screw up is to believe that the numbers are mere suggestions. If your expenses total more than your income, you need to make adjustments. You might need to move financial targets around and put off some of them to cover immediate needs. If you are saving up for a trip in a few months then you might have to put it off. Redirect that amount to payments rather than fall behind on them.
Another thing you can do with your debt management plan is to increase your income and lower down expenses. These two works great together in strengthening your budget. You can also look into debt consolidation to help you streamline your debt payments. This will work best if you are able to meet your monthly payments but you are having a hard time monitoring payments.
Change your behavior
This is one of the hardest things to do and could very well take a great amount of time to accomplish. There are two things to remember when you are trying to change your financial behavior for any debt management plan. The first is to start now and not plan to start soon. That “soon” may never come or it can even mean months down the road.
The second thing you need to remember is to take small steps. Make small changes that can ultimately lead to your goal. If you are trying to change your impulsive buying behavior then finding another route away shops could be a good start. It can help you stay away from temptation. You can also try leaving your credit cards at home to help you curb your desire to spend. Make small steps but the important thing is consistency. Put one foot in front of the other and the next thing you know, you are running.
There are a lot of financial mistakes that you commit in life. Some will even have repercussions that will feel for a long time. The important thing with these types of mistakes is to learn from them. You need to understand that mistakes are avoidable and you owe it to yourself to do better next time. The last thing you need is to make the same mistakes over and over again.
Set a goal
In any debt management plan, you need to have a goal. It is important that you have a target that you are trying to reach. Without it, you can be trapped into thinking you are making any progress at all. When in fact, you are still right where you are trying to start off from. This is because your goals are not there and you cannot benchmark your progress.
It most cases, these financial targets are pretty straight forward. If you are trying to pay off your debts then that is a goal already in itself. You just need to put a few more details. How much are you trying to pay off? How long are planning to make repayments? And more importantly, how much will you commit to paying every month.
You need to be very specific when you are working on a debt management plan. General goals might not cut it. It is important that you have concrete targets to aim for. This gives you additional focus on the job at hand. It also provides clear-cut direction on where you need to be and what steps you need to take. This brings you closer to your goal and makes the journey to paying off your debt a little easier.