We’ve all heard of a juice cleanse to detox our bodies but what about facing up to the burden of our debts and cleansing ourselves of the guilt and trappings that come along with it.
Here is a five step plan to help you face and finance your way out of debt:
Step 1. Face the facts
Open all your bills gathering dust, check all your account balances and understand where you’re at with each area of your debts.
Knowing the balances, repayments and interest rates will help you prioritise which ones are the nastiest.
You can’t solve the problem until you have a thorough understanding of where you’re at.
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Step 2. Prioritise your repayments
Work out which debt is charging the highest rate of interest, which is usually a credit card, and work towards paying it down first – credit card interest rates average around 17.5%. Plus you’re also more likely to get stung for things like late payment fees.
Step 3. Consolidate what you can
If you have multiple credit cards, transfer the balance of these onto one card with a long 0% balance transfer offer attached to it.
Instead of paying multiple high interest rates you’ll get 0% for up to 24 months to help get your debt under control.
Plus, one payment will be easier to manage than two or three.
Step 4. Communicate with your lenders
Many people are afraid to contact their lenders in fear that you’re alerting them to your high debt. We hate to break it to you but they already know about it!
On a positive note, they might be able to offer advice or change your payment plan if they have a better understanding of your situation.
In fact, banks want to help customers who are in legitimate financial strife i.e. hardship and often do this by restructuring debt, waiving fees or deferring payments.
The sooner you have this conversation the better.
Step 5. Make a change
If you’re going to tackle your debt, chances are you’ll need to make a change to your budget or your day to day spending to siphon any extra cash in the direction of your debt.
This might mean making small sacrifices – packing lunches or living a more basic lifestyle – or big sacrifices like selling an asset.
Either way something’s got to give to get you back into the black.