Having debt might mean leading a stressful lifestyle. However, there are many things you can do when you have debt to help you get through the process and stay debt free later on. Below are some essential things to do if you have debt.
1. Consider Bankruptcy
Many people think filing for bankruptcy will negatively affect their lifestyle. On the contrary, once you file for bankruptcy, all but your exempted assets will be seized and sold to cover your debt. Afterward, you can celebrate being debt free and enjoy a new start. Don’t shy away from filing if necessary. Instead of dealing with debt for years, filing for bankruptcy will help you get back on your feet in the short term.
2. Create a Budget
Anything from home renovation projects to your children’s medicine has a cost. Create a budget to keep track of everyday items and expenses. For instance, according to HomeAdvisor, most homeowners will pay a little over $4,600 to repair foundation issues. If you must make that repair, budget differently for the next months in order to still save money and pay other bills.
3. Make a Debt List
Take some time to make a list of all debts. This includes credit card debt, student loans, medical debt, and more. Once you have your list complete, rank them in order of priority. Tackle the higher-interest debts first while paying the minimums on the lower-interest ones. You can also use this list as motivation when it feels that debt is taking over your life.
4. Pay Off Debt as Soon as Possible
It might be tempting to use a debt consolidation loan or credit cards but this won’t help you get out of debt faster. Instead, focus on the principal balance and prioritize paying off the debt as soon as possible so that you don’t have to pay more interest in the long run. Additionally, you can also look for ways to save money and pay off the debt sooner.
5. Create an Emergency Fund
It’s important to create a good financial cushion so that unexpected expenses don’t add to your existing debt. Aim to save at least $1,000 in an emergency fund before anything else and keep building on it until you have at least 6sixmonths of your salary saved up. This way, if an emergency arises, you can use the funds instead of relying on credit cards or other forms of debt.
6. Talk to Your Creditors
Don’t be afraid to talk to your creditors about payment plans and other options for reducing the amount you owe. The creditors will usually be willing to work with you and provide payment plans or reduced interest rates. This way, you can minimize your debt payments and make progress in paying off your debt faster.
7. Make Smart Investments
Now is not the time to take big risks with your money, but you can still make smart investments. Invest in low-risk strategies such as index funds, mutual funds, and stocks that are not too volatile. This way, you won’t risk your money while also having the opportunity to grow it. In addition, you can also invest in your home if you plan on selling it soon. For instance, a new asphalt shingle roof has an ROI of about 62%. Every dime you spend should be invested wisely.
8. Consider a Bankruptcy Lawyer
If your situation is more complex, such as dealing with a foreclosure or being sued by creditors, it’s best to speak to an experienced bankruptcy attorney. They can help you navigate the process and increase your chances of getting debt relief. Fighting this battle on your own is not a good idea.
Debt doesn’t have to control your lifestyle if you know how to properly manage it. Follow the above tips when dealing with debt and you will soon be on the road to financial freedom.