More and more consumers are finding themselves in debt than ever before. With the economy on shaky ground and people tightening budgets, it doesn’t take long for debt to become a reality and spin out of control. Many people faced with a mounting pile of bills can easily become overwhelmed, worrying about how they will ever be able to afford to pay of any of the bills and often ignore the problem, which only makes it all worse.
Being in debt, no matter how deep or how recent, is not the end of the world. The key is to attack the debt head on. For this you need to start with a plan. The first step of such a plan is to collect all of your bills at the same time and analyze what is going on with your account. On a piece of paper, write down the name of the account, the total balance due, the minimum payment due each month, and the amount of the interest rate charged. Make certain you have included all of your bills. Ordering a copy of your credit report can help to ensure you have included all of your debt and can help you understand the exact nature of your personal financial situation.
After you have listed your debt obligations, look over your list and determine which of the accounts charge the highest interest rates. Number each account according to the interest rate charged. For instance, the account with the highest interest rate should be listed as number one, and so on down the list.
Once you have created your list of debt, start working on your budget. Total up all your sources of expendable income and develop a budget for a month. Be sure to include daily living expenses and the like. Your priority will be to pay off the bill with the highest interest rate first, despite the remaining balances. Many people make the mistake of paying off the accounts with the highest balances instead of the highest interest and find they never get anywhere.
When creating your plan of attack on the high-interest accounts, figure out how to make payments that are double or triple the minimum payment required until the account is paid in full. As one account gets paid in full, take that payment and move it to the next high interest account. Continue on this payment plan until your accounts are paid off and current. You should find that it becomes less difficult to deal with overwhelming debt once you establish a cycle of budgeting and payment plans. If you find you can not afford to double up on payments and still live an adequate lifestyle, you may want to consider finding new employment with a higher pay rate or perhaps take on a second job and dedicate those funds to paying down your debt.