How to Take Control of Your Debt


From the start, I need to tell you that I'm not referring to your 30-year mortgage that has the purpose of getting you a house, or to your auto loan (both of these having low interest) even if these loans can be paid much sooner.


What I'm actually trying to tell you is how to get rid of the loans that have no purpose in your life, especially older loans with higher interest, which are still active and keep you stuck in a circle of debt.


I'm talking about your personal debts that don't have other purpose than make your life a living hell, and they usually cost you way more money that you need to spend.


I'm talking about any sort of unnecessary credit-card loans, auto loans with very high interest, student loans or any other personal loan that make you pay a lot of money month after month.


Get rid of bad debt


These are the steps to turn your bad dept into good debt (debt that is useful to you).


1. Understand your debt


You need to be aware of the level of debt you are in, and how much that debt is costing you (the level of interest for each personal loan you have).


Look through your finances and make a list of all the debt that you owe by including the balance that you owe to each specific debt and also the interest rate of every loan.


Once you have the list, you will see right away what is good debt and what is bad debt for you, and you will understand what loan should be paid right away to get rid of bad debt (debt that costs you more than it offers).


2. Track all your spending


If you want to take control of your debt and get rid of bad debt, it is very important to start tracking all of your spending over the next month because this way you will figure out exactly how much money is coming into your account and exactly how much money is leaving your account.


By tracking your spending you will get a very eye-opening experience because it will show you where the money actually goes every month even of you are not very aware of it, and how you can better optimize your spending and use that money for something more useful for you.


3. Make a difference between what you need to spend on and what you want to spend on


Put your housing payment, insurance payment, utility bills and anything else that is essential to you for living on one side.


Establish a baseline of how much money you need every month to survive, and all the other payments will be something that you don't need but you want to spend money on it.


4. Cut unnecessary payments out


Once you know how your money is spent monthly, you will quickly find a few payments that are not very nedecessary, so cut them out from your monthly spending.


This way you will start saving some money every month, and that small amount of money will be used for something more useful for you.


5. Consolidate your debt by getting rid of bad debt


Debt consolidation works like this. Let's say that you have three credit-card loans and a personal loan, and you pay for all these loans a very high interest rate every month.


Especially if you have older loans when the interest rate was higher than today, you should do something with them.


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You have to consolidate all your personal debt (including your credit-card debt) into one singular loan with potential lower interest rate (compared to the interest rate of your older loans).


It's always better to have only one loan that covers all your personal needs than having several loans that you are no longer controlling.

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