19 Oct

Debt Defying: 3 Tips to Manage Your Debt

Man worrying about his debtsIt’s no secret: Americans are swimming in debt.

Collectively, American households will owe about $13.29 trillion by the end of Q2 2018, according to the New York Fed. The average American debt is typically comprised of mortgage, credit card debt, auto loans, and student loans.

Some people also have loans from private institutions, so to avoid risking more money problems, they should make careful decisions. Utah Money Center, a cash loans provider in Salt Lake City, says that interest rates vary, with some companies offering loans at high interest rates. If you need to take out a loan, you should be aware of the interest rates across loan companies. Otherwise, you may end up finding yourself overwhelmed by debt and saddled with heavy interest payments.

Here are things you can do to manage your debt and avoid worsening the situation:

1. Make a List of Your Debt

This list should include the names of the creditor or lender and how much you owe them. You can also use this list to update information about your debt – crossing out what you have already paid and adjusting payment dates when necessary.

Having this list will also allow you to see the bigger picture: how much you really owe. As a result, you will be able to budget better.

2. Know Your Priorities

Your debts have different interest rates, so it is smart to pay the one with the highest rate, which is usually your credit card bills. Paying your credit card bills on time will have a positive effect on your credit score. Additionally,  you will not have to pay for any late fees.

From a psychological standpoint, however, you may want to prioritize smaller debts which you can pay for in full. There’s a sense of satisfaction that comes with wiping out a debt in its entirety. Because of this, you might stay motivated to pay off other debts – this is called the snowball method.

3. Stick to Your Budget

You should note what you earn and what you should spend, then stick with your calculations. Discipline yourself so you won’t have to spend more than you should. You should also allocate money for emergencies so if the time comes, you don’t have to spend what is already allocated for other expenses.

Your debt is your responsibility. If you don’t pay it back, it will hurt your credit score and risk delinquency and defaults. Besides, if you work hard to be debt-free and manage your income properly from then, you may even eventually be able to set some money aside.