Master Your Debt: DIY Strategies for Effective Debt Relief
There was over 100 billion dollars collected in consumer interest payments of debt last year in 2022 alone! That is an absolutely insane amount
Introduction
Are you feeling overwhelmed by debt and unsure where to start? I've been there. And guess what? You're not alone. In fact, millions struggle with managing debt. There was over 100 billion dollars collected in consumer interest payments of debt last year in 2022 alone! That is an absolutely insane amount, and as interest rates rise, so will the amount of interest charged and collected. With the right approach, achieving financial freedom (and paying off your debt) is possible. Let's embark on a journey to understand and conquer your debt.
Understanding Your Debt
"You Can't Really Know Where You Are Going Until You Know Where You Have Been" - Maya Angelou
Consider the quote above from the world renowned poet author and civil rights leader Maya Angelou. Before you get started on your journey forward, you need to know where you've been, and where you are currently. It's time to face the music and look at it straight up. A thorough understanding of your debt is the first step. This means knowing not just how much you owe, but also understanding interest rates, minimum payments, and how your debt is structured.
What I like to do in this case, is create a simple google sheet, which displays credit cards on each row, along with their interest rate, and put months of the year as column headers.... then in the intersecting cell I enter the balance of each card underneath the month of the statement.
Add a totals at the bottom of the table and you can get a total amount owed for each credit card balance by month.
You don't need speak with someone to do this, you don't need to have your credit ran. You just need to sit down, face the music, and take inventory of where you have been and where you are before you know where you are going.
Setting Realistic Goals
You got to give yourself something to strive for, look forward to, and reward yourself with. Set some realistic goals and take note when you have reached them each month. Consider the following:
- close more subscription services than you opened
- sort your debts from highest to lowest interest
- close any accounts with annual fees
- made all payments on time
- charged no fees for one month
- opened no free trials
- paid more than the minimum payment on a card
- paid more than the minimum payment on all cards
- closed one card
- closed two cards
- closed three cards
- checked your own credit at annualcreditreport.com
- successfully got a fee WAIVED from a product, company, or creditor, by simply calling and requesting.
Budgeting Basics
A budget isn't just a plan for your money; it's the cornerstone of debt management.
the CORNERSTONE!
Do you have a personal budget?
I suggest the federal trade commission's free budget worksheet, which you can download for free here https://www.bulkorder.ftc.gov/system/files/publications/pdf-1020-make-budget-worksheet.pdf
It's simple, straightforward, and allows no room for excuses. If you'd like feel free to recreate it in a google sheet.
Debt Prioritization
Once you have documented each of your debts, and created a monthly budget... It's time to prioritize your allocation to the appropriate cards. Generally speaking you'll want to apply extra payments to the card that has the highest interest rate.
Negotiating with Creditors
While this might be possible, generally speaking it can be a risky business... Many creditors won't negotiate with you unless you are behind and delinquent on your payments... and sometimes for a period of time first. In my experience, I have found that simply CLOSING the revolving account with creditors, can help put that tradeline on the right track and into a fixed amortization schedule as opposed to a revolving nightmare.
Debt Consolidation: A Viable Option?
Ok so, here's my two cents on debt consolidation. Does taking 2-3 credit cards at 30% interest and consolidating them into one personal loan at 30% interest (hypothetical example) make sense to do so?
Generally speaking - yes - a fixed amortized term is more favorable to reaching payoff than a revolving account, even when interest is the same assuming the payments are manageable.
The trick here, is that if you haven't developed strong budgeting and spending habits then you run the risk of simply repeating the pattern of spending more than budgeting, increasing credit card balances and you'll also have the personal loan payment on top to boot. That's a scary situation. If you are ALREADY here in this situation, consider speaking to a consolidation or relief specialist.
Protecting Your Credit Score
Your credit score is a critical component of your financial health. Similar to taking stock of your debt, and your spending habits (budget), you need to take stock of your credit score.
The best way to do this, free of charge without signing up for free-trials or paid services (remember our goals!) is to use the government funded website Annual Credit Report . com .
You get one complete credit pull per year, per credit bureau. You, and everyone in your family, should take advantage of this service.
When using it, by default the service pre-selects all three credit bureaus. One technique I have found useful to de-select two bureaus, and simply run the report for a single bureau (Equifax, Experian, TransUnion). This way you can spread out the pulls throughout the year for no charge. The risk here is that not all tradelines are necessarily reported to all three bureaus, so if you're only looking at one credit bureau at a time you might not be seeing a full picture of your credit score.
Regardless, this exercise will help build the muscles needed to take and manage stock appropriately.
Seeking Professional Help
Sometimes, the best course of action is to consult a debt counselor. Learn when it's time to seek professional advice and how they can assist in navigating complex debt scenarios.
Staying Motivated
You didn't get here overnight, you won’t get out overnight. As you build habits appropriate behavior will feel easier and easier, so try break up the habit building into manageable days. 3 days, 3 weeks, 3 months.
Conclusion
Remember, managing your debt is a journey towards financial freedom. With the right knowledge and tools, you can navigate this path confidently. For more personalized guidance and resources, visit DebtReliefRooster or contact our partners of financial experts. Your debt-free future awaits!