High debt levels can be devastating and should be tackled right away to improve your financial health. Many individuals across the nation have found that their high debt levels are unsustainable and are trying to find a method that will let them pay down their debts as quickly as possible. People that are deeply in debt need to find effective tactics for dealing with the issue to be able to eliminate their debts completely. Here is one of the best ways found to tackle and eliminate high debt levels.
Figure Out How Much Is Owed
Before you can create a plan for repaying your debts, you need to know how much you owe to your creditors. Find all of your recent credit card statements and current loan documents to obtain the latest figures of what you owe to each company or lender. These amounts should be totaled to create a complete picture of your debt situation. You should also figure out how much you are paying in routine monthly expenses so that you can begin to create a repayment plan that will not dramatically affect your quality of life.
Start Planning A New Budget
Ignoring the problem will not make it go away and the longer you go without attempting to fix the issue, the worst the problem will become. As soon as you recognize a problem with the amount of debt you are carrying, you should begin planning a new spending budget that will allow you to divert more of your income to paying down your debts. This monthly budget should cover your necessary expenses for the month and eliminate any unnecessary spending. Any savings from the new budget should be applied towards paying down your existing debt.
Start With The Highest Interest Rate
Many people believe that focusing on the debt with the highest interest rate first is the best course of action because you are paying less and less interest as you pay down the balance of the account. For this technique, you should pay the most towards the balance carrying the highest interest rate while paying the minimum on all of your other accounts. You will see the balance of this account decrease rapidly as time goes by. Once this debt has been eliminated, you can shift your focus to the account with the next highest interest rate and begin the elimination process again.
Join our newsletter
Subscribe to get the latest "Engineer Your Finances" content via email.