Let’s be honest: In this day and age, it’s all too easy to rack up debt—no matter your income level. Most consumers receive credit card offers in the mail regularly, each one promising a tempting perk, reward or interest rate. Unexpected circumstances can crop up at any time, from a broken-down vehicle to a medical emergency. Education tends to be expensive, as does the cost of living in many cities.
If you’re currently struggling with debt, you’re far from alone. According to NerdWallet, the average household with credit card debt has a balance of $15,482. The average household with any kind of debt owes $134,058. Furthermore, these numbers are on the rise year over year.
But there’s good news, too. Carrying debt, even a significant balance, doesn’t have to be a death sentence for your financial health. As they say, slow and steady wins the race. Here are three tips for tackling debt in a manageable way.
Tip #1: Don’t Expect Debt Relief Overnight
Most debt builds up over a period of time thanks to interest. So, it only makes sense to allow yourself time to pay off your outstanding balances. Tackling significant debt typically takes months or even years—but the end result is well worth the commitment.
Various debt relief solutions have different timelines. A debt settlement program like Freedom Debt Relief typically takes 24 to 48 months to complete. Why? Because enrollees must save up enough money in a dedicated account before trained negotiators can reach out to creditors on their behalf and attempt to reach a settlement lower than the original balance. The end result can be a lower total balance, lower interest rates and fewer fees, but it takes time for consumers to amass a sum with which to negotiate.
Another option for debt relief, consolidation, involves taking out a single loan to pay off multiple higher-interest debts. While this can make debt more manageable by lowering the interest rate and consolidating various payments into a simpler one, you’ll still have to repay the full amount of money you owe as a loan. As you’d imagine, this can also take months or years to complete.
Tip #2: Strategize for the Short and Long Terms
True financial health results from a combination of short-term actions and long-term goals. Instead of getting overwhelmed by the big picture, think about what you can do in the present to progress your journey toward becoming debt-free.
The most basic way to free up more money for paying down debts is to budget thoroughly up front. This practice helps consumers keep track of their income versus expenditures, so they can see where their money is going. This serves as the first step toward making positive lifestyle adjustments.
Once you’ve streamlined your spending habits and freed up extra money to devote to debt repayment, it’s time to prioritize. Which debt should you tackle first? Compile the following information about each debt:
- Amount owed
- Minimum payment due
- Interest rate/APR
- Due date for payment
From there, you can create a game plan. Many consumers tackle debt by interest rate, prioritizing the highest and moving toward the lowest. Others find success starting with the most manageable and working their way upward.
Tip #3: Work on Building Sustainable Money Habits
Debt is sneaky; it can start amassing again at any time. For this reason, it’s crucial to work on developing sustainable money habits. Tackling debt in a manageable way means paying down your current balances but also setting yourself up for financial health in the future.
By taking a slow and steady approach to debt relief, you have a better chance of making lasting change that sticks.