How to crush your debt easily with 3 simple steps in 2020

To most people, like me, keeping New Year’s resolutions is difficult. Some people even hesitate to make new year’s resolutions at all. But some people responsibly follow each resolution they make on the occasion of New Year.

 
Of all types of resolutions, managing finances is one of the most common of all that is usually broken. People mostly fail to get debt relief due to their negligence towards financial matters.

 
Make sure 2020 is the year when you are definitely going to keep your get out of debt resolution. If you can follow these 3 basic steps to crush your debt, you can reach your goal to become financially free in 2020.

 

1. List all of your debts from lowest to the highest amount

Relax and take a deep breath. Now you are going to prepare a list of every outstanding debt you owe, a.k.a. your total debt balance. This may include:

 

  • Credit card debts
  • Payday loans
  • Personal loans
  • Mortgages payments
  • Student loans
  • Auto loan payment

Once you made the list of all your debts, sort out the unsecured debts from that list and create a new final list of debts to start your quest. So, practically mortgage and car loan payments will be out of that list as they are secured debts with a collateral.

 
*Do not forget to list every balance with their interest rates and creditor names.
Now you have a clear picture of what you owe and to whom.

 

2. Decide which debt to crush first

Professionals might suggest you focus on the debt with the lowest balance first because it’ll be easier to crush such debts due to the low balance. You may even get out of debts quickly if the entire balance of a particular account is small enough.

 
But if you ask me, I’d always target the debt with the highest interest rate. The best way to crush your debt is to target your highest interest debts first. It is because the highest interest debt can continuously generate more debt into your account. Normally, payday loans and credit card bills have the highest interest rate compared to other loans.

 
In some situations, the circumstances related to your debt may push you to pay it first. For example, if you have taken out a loan against your retirement plan and somehow facing issues in your work life, it is better to pay off that debt as soon as possible. To support your quest, you can engage in multiple income streams like doing any side hustles. If you live in a friendly neighborhood where you can arrange a good old-fashioned garage sale, do it. It is the easiest and a low-cost option to clear your unwanted commodities and make a profit out of those things. Once it is done, use the money to pay off your debts.

 
Once you have determined which debt to target first, analyze your basic expenses again before starting the quest. Start from the current month, make minimum payments on other debt accounts and invest as much money as possible to make payment on the target debt, which is the lowest one.

 
If you have confusion about how to save money from your monthly budget and make debt payments, it is suggested that you should use the 50/30/20 budget strategy. Keep basic, important expenses on top priority, like housing costs, and engage 50% of your income for that. Then engage 30% for other requirements, and use 20% for savings and debt pay down. You can even use the 20% to repay debt if you can.

 

3. ‘Snowball’ or “avalanche” your remaining debts

Once you’ve made the list, now it is time to choose the debt payment strategy.
You primarily have 2 options:

 
a) “Snowball” – List your debts as per their amount, from the lowest to the highest. Engage most of the income to repay the debt with the lowest amount. Make sure to make minimum payments to other debts. Once it is paid off, target the next debt account on your hit list. Again, follow the same strategy on the next debt with the lowest amount and make minimum payments to other debt balances.

 
b) “Avalanche” – Just like the previous method, you need to make a list. But this time list the debts as per their interest rates, from highest to lowest. Make minimum payments to your other debts and focus on the one with the highest interest rate. Once it is paid off, choose the next with the high interest from your kill lists. It is my favorite debt payoff strategy so far.

 
You need to take care of your credit score also. Making extra payments each month on your debts can also lower your credit utilization ratio which can improve your credit score.You may also think about the option of debt consolidation. You may tackle your credit card debts by choosing one of the popular debt consolidation methods, a.k.a the balance transfer method. You may also take out a debt consolidation loan (a personal loan) to consolidate multiple debts into one.

 
The more you pay off your debts, the better your credit score will be.

 

Endnote

These are the 3 basic steps to crush your debt. Once you gather debts, you should try to get rid of them as soon as possible. Remember, you can’t get debt relief in one night. If you follow these financial steps properly and keep your patience, you’ll definitely progress in your quest to crush your debts.

70 Percent of consumers are in debt – Are you one of them?

 

The holidays are arriving. But consumers are still crying over their financial owes. As per a survey conducted by CompareCards.com, 70% of Americans are in debt and they are crying over their financial wounds. Around 31% of these people are in financial trouble due to household debt, and 20% of these consumers are worrying due to credit card debt.

 

Debt is a huge source of stress. Everyone knows about it. Debt takes an emotional toll on the people. Almost 15% of the surveyed people are worried due to unemployment, high cost of living, rents, and mortgage payments. Almost 14% of the surveyed people are tensed due to tight budgets.
The survey was conducted on 1004 consumers. But this survey reflects the general consumer debt scenario of America. Consumers have $1,074,979,918 credit card debt in the US , which is a massive amount. And, such a huge debt load is driving consumers to tears.

 

Only a debtor knows how it feels to be in debt. Sometimes, it feels overwhelming and stressful. It pushes people toward depression and anxiety. Ballooning credit card debt and student loan debt have become a point of major concern for people. And, it’s logical. It’s normal. Anyone would feel stressed.

 

#Survey result

Millennials are immersed in student loan debt.
70% of Americans are stressed out due to their debt problems.
31% of Americans are worried due to household debt.
20% of Americans are tensed due to credit card debt.
15% of Americans are crying due to inflation.
14 of consumers are distressed due to tight budgets.
Millennials are emotionally perturbed due to student loan debt.
Millennials are also worried about bringing up kids.
Women are crying due to rent and monthly mortgage payments.
Men are more concerned about their auto loans, student loans, and credit card debts

Other financial factors leading to stress and anxiety are personal loan debts, medical debts, retirement, investments in the stock market, tax, credit score, and identity theft.

 

#How to get out of debt and financial stress

Are you also shedding tears for your debts? Do you also belong to this 70% category? If so, then don’t lose your heart. There are a few tips you can use to get out of debt and depression. Here you go.

 

1. Think rationally instead of emotionally: Life is not a bed of roses. You can’t expect that there won’t be any problem in your life. If you have debts, you have to pay it off. Don’t panic or get stressed out. It’s natural to be worried when the debt amount is huge. But there are plenty of ways to get rid of debt. You’re not the only one who is in debt. Millions of people are in debt. If they can deal with it, then why can’t you?

 

2. Create a debt payoff plan: Unless you have a debt payoff plan, you can’t get out of credit card bills or student loans or auto loans or mortgage. If you have credit card debt, call your creditor and ask him to lower the payoff amount. If your track record has been good, the creditor is most likely to give you a settlement offer. The problem is most people prefer crying over their credit card debt problems instead of calling creditors.

 

If you have a mortgage and can’t make monthly payments, then ask the lender for a loan modification. Refinancing is also a good option for you.
If you have a federal student loan debt, then you can explore various repayment plans to lower your monthly payments. And, if you have auto loan debt, then refinance it if possible.

 

3. Create a budget to spend less and save more: No matter what debt repayment plan you choose, you have to pay money, even if it’s a small amount. You have to arrange the money, and for that you need to create a personal budget plan. Download a budgeting application after reading its reviews and split your expenses accordingly. Focus on reducing your luxury expenses so that you can save more in the long run. The more you save, the more you can pay toward your debts. See also: How can you make a perfect budget when you are jobless?

 

4. Get advice from the professionals: What do you do when you’re suffering from viral fever? In most cases, you consult a doctor and get the required medicines to be fit. Likewise, when you have debts and can’t pay them off, you should get advice from the certified credit counselors and debt negotiators. These people have immense knowledge on the various ways to get rid of debt. They know the root cause of your problem and also the solution. They also know how to negotiate with creditors and grab an affordable repayment plan for you. So if you’re in debt, then you should approach a debt relief company and ask for a solution.

 

However, don’t be in a hurry. Make a thorough research on the debt relief company before making the final call because scams are also rampant in the country. Read more: Clear your debts with professional help and DIY Options.

 

Final words

There are thousands of people who are going through debt problems in our country. They need both help and hope to recover from debt distress. If you’re one of them, then use the aforementioned tips to repair the broken parts of your financial house.