In order to build and
maintain good credit, borrowers need to remain in good standing with their creditors.
This means paying their bills on time and making the full monthly payment.
However, borrowers that find themselves saddled with debt are often unsure of
how to reduce their debt and get their credit back. Trying to eliminate your
debt? Consider the following five strategies:
1. Track Your Spending
A budget is the best starting point for anyone hoping to tackle their debt.
Your budget will detail where your money should go. After you create a
realistic one, the next step is to track all of your spending.
Even if you have an air-tight budget, your spending habits may tell a different
story. By monitoring where your funding is going, you’ll be able to better
control everything. Once you identify where you are overspending, you’ll be
able to start making adjustments that will help to pull you out of debt.
Begin the tracking process by collecting records and receipts for your cash
withdrawals. Compare these numbers with what is written in your budget. If need
be, you may have to make a few changes to your budget or bring in more money if
you cannot cut your spending.
2. Calculate Your Debt to Income Ratio
Borrowers often struggle to get a handle on their debt for one simple reason:
they don’t know their debt to income ratio.
The ratio is the monthly net income that should be used to pay off debts. As
statistics point out that most Americans spend more than the amount they earn, it is
increasingly difficult for individuals in debt to break out of their old
habits. Pair that with high-interest rates and borrowers will be stuck in this
same debt cycle for years.
It is recommended that borrowers have a debt ratio that is 30% or lower. This
statistic is used by lenders to assess one’s creditworthiness. For this reason,
one of your first goals at this time should be keeping your percentage within
the acceptable limit.
3. Consolidate Your Debt
Debt consolidation is another helpful way to start making a dent in your debt. With
a provider like Roseland Associates, you can consolidate your debt into one
bill. Instead of paying multiple monthly payments to your various creditors,
you will only have one loan that you continue to pay each month.
When looking to consolidate your debt, you’ll find that you have the option of
reducing your monthly payments and even lowering your interest rate. With a
loan from Roseland Associates, you’ll be able to merge your debt and reduce the
total owed through monthly payments.
4. Take on a Side Job
Overcoming debt may require you to think outside the box. Even with all your
saving, you may find that you need an increase in your income. Taking on a side
hustle or two may be the boost you need to make some significant strides to
becoming debt free.
Whether you take on a part-time job or you do a few gigs here and there, you’ll
find that you can breathe a lot easier with a new stream of income. While it
won’t always be easy to keep pushing yourself to work, remember why you’re
doing it.
5. Remember to Pay Yourself
“Paying yourself” refers to putting money away in your savings before you start
paying down your debt. As 28% of Americans don’t have any savings, failing to
do this basic part of money management won’t help you achieve your goals of
eliminating debt. In reality, not having any money in your savings will only
put you in the same situation of needing to borrow money in the event of an
emergency.
Even if you can’t make major contributions to your savings right now, you
should get into the habit of doing so in small amounts. Whether it’s $5 or $50
a week, putting money away now will certainly pay off later as you grow your
savings and continue to reduce debt.
While it isn’t likely that your debt will disappear overnight, you can take
serious steps towards paying it down. By keeping these five tips in mind,
you’ll be able to adopt new money management habits and rebuild your credit.
0 Comments